Posted by Guardian on
A LANDMARK merger agreement appeared on the horizon at the weekend, raising the prospects of a radical alteration of the industry in Nigeria.
A LANDMARK merger agreement appeared on the horizon at the weekend, raising the prospects of a radical alteration of the industry in Nigeria.
At separate meetings, the boards of directors of UBA and Standard Trust Bank Plc, approved arrangements for a fusion of both financial institutions.
The Guardian learnt yesterday that on the cards is an ambition to create the biggest bank in West Africa and one of the largest in Africa.
The assets base of the proposed merger is expected to be formidable, judging from the current portfolios of both banks. When concretised, it will offer the full spectrum of banking services, from basic products and services for the low-income personal market (the unbanked and under-banked) to customised solutions for the commercial and corporate markets.
The combined balance sheet of both banks will be in excess of N400 billion. Their shareholders' funds currently stand at N40 billion. This is apart from their current year retained earnings. Their yearly profitability has been approximately N10 billion, with a combined branch network of about 400.
UBA is one of the three largest banks that have historically dominated the banking space in Nigeria, alongside First Bank PLC and Union Bank PLC. They are collectively known as the "Big Three". UBA is owned by a broad spectrum of local and international private and institutional investors including Banque Nationale de Paris, Bankers Trust (Deutsche Bank), Banca Nazionale del Lavoro, and Monte dei Paschi di Siena. It was formed to take over the banking business carried on in Nigeria since 1949 by the British and French Bank Limited.
UBA has a strong representation in the corporate and wholesale markets. It also has a large and established retail franchise and two foreign branches in New York and Grand Cayman Island. The Bank enjoys considerable goodwill and brand recognition.
Standard Trust Bank PLC is a leading 'new' generation bank (licensed in 1990). It currently ranks among the five largest banks in the country by most indices.
It has over 100 branches spread out strategically across the country in what is described as the largest truly online real-time banking network in sub-Saharan Africa. It is often referred to as Nigeria's neighbourhood bank. This derives from its national orientation in terms of geographic spread and continuing national expansion.
The combination of UBA and STB makes for a formidable team. The enlarged bank will have close to five million customers.
Chief amongst these areas of strength is the retail and consumer finance space. The enlarged institution will have the widest branch network in Nigeria, a critical criterion for success. This will make it a formidable competitor in an area that is set for strong growth in the coming years as government efforts to put the economy on a sustainable growth path take root.
The respective Boards also believe that the enlarged institution should build an investment and wholesale banking operation that will be regarded as the foremost franchise in Nigeria, leveraging UBA's existing strength and international presence and reputation. The enlarged institution can be expected to play an increasingly significant role in key growth sectors of the Nigerian economy, such as telecommunication and energy finance. It will also seek to engage in the ongoing reforms of the power sector. A further area of advantage will be the public sector (at both the state and national levels) where both institutions have developed strong franchises.
The respective Boards believe that local dominance will be an effective springboard for regional and global relevance. The merger may have already secured the support of the government and the regulatory authorities.
The merger has the potential to create benefits for all stakeholders in the two banks. The merged entity will have the kind of financial strength envisaged by the monetary authorities to support the economy.
Shareholders of the two banks will benefit immensely from the merger. Based on the envisaged synergies of the combination, the latent and hitherto sub-optimized assets of the two banks, the many opportunities for economies of scale and the sheer size of the union, the future income potential for shareholders can only be described as humongous. Furthermore, the enlarged and diversified ownership structure of the merged entity will produce a very strong Board of Directors that will drive Corporate Governance to new standards in the country.
Staff of the new bank will also be great beneficiaries, as the wherewithal to train, develop and properly remunerate them will not be lacking. The expansionist vision of the new bank will also guarantee new job creation instead of the job losses feared by many at the advent of the CBN's reform/consolidation drive.
Coming against the background of the Olusegun Obasanjo administration's efforts to nudge the banking sector towards systemic consolidation, the merger of UBA and STB is also seen as an industry redefining development. It is entirely consistent with Professor Charles Soludo's view of strengthening and consolidating the banking system to ensure a diversified, strong and reliable banking sector which will ensure the safety of depositors money, play an active developmental role in the Nigerian economy and produce operators that will be competent and competitive players in the African regional and global financial system.