[2008-08-29]  Mergers & Acquisitions Shake Banks
MERGERS AND acquisitions could soon be erupting in the banking sector as plans are afoot by some financial intermediaries to merge or acquire strategic stakes in other banks.

The phenomenon had already begun in the insurance industry where some Nigerian insurance firms including IGI insurance acquired strategic stake in Network Assurance.

With the looming recapitalization of universal banks to GH¢60 million by 2009, the banks had begun looking for means to shore up their capital base- a position that could trigger some mergers and acquisitions.

Ecobank Ghana Limited had already sent signals that it would welcome any merger or acquisition but rather in a friendly manner.

Arnold Ekpe, Chief Executive Officer of Ecobank Transnational Incorporated told CITY & BUSINESS GUIDE at the bank’s board meeting in Accra recently that the bank would consider any acquisition provided it was friendly.

He admitted that since the bank was entrenching its position in all the markets it operated in Africa, it would highly welcome any merger from a financial institution.

Already, the parent bank, ETI had begun a $3 billion Rights Issue, Share Offer and Debt Instrument in order to expand vigorously in all the countries it operated and open new markets.

Talks of a merger between Merchant Bank and Trust Bank Ghana Limited had also been in the news for sometime now since a statement issued by the two banks in June noted that the merger was expected to lead to the emergence of a large, strong and dominant Ghanaian-owned bank with the Social Security and National Insurance Trust as the largest shareholder.

Though a consortium of financial advisors led by KPMG, a renowned accounting and management professionals had been appointed to serve as an advisor to the fusion, workers of Merchant Bank were bent on disrupting the process.

Information also gathered by CITY & BUSINESS GUIDE indicated that more banks could follow suit soon.

This was due to the apprehensions that less than 10 of the 24 banks currently operating in the country could readily meet the new capital requirement announced by the Bank of Ghana within a year.

According to an analysis of the 2007 financial statements of the 22 banks by PriceWaterHouse Coopers, Merchant Bank, Agriculture Development Bank and Ghana Commercial Bank were the only three banks that might not require additional capital to meet the minimum capital requirement for 2009.

Two indigenous banks, CAL and First Atlantic Merchant banks could also be considering any merger or acquisition looking at the new capital requirement as well as the oil discovery where banks would require larger capital base to execute projects.

Other international banks such as Zenith, UBA and International Commercial Bank could be seeking recapitalization from their parent organisations.

The Nigerian experience where the Central Bank (CBN) increased the minimum requirement of banks from two billion Naira (US$14.5 million) to 25 billion Naira (about $ 181million), reflecting an increment of 1150 percent in 2004 was still fresh in the players’ minds.

The move caused ripples in the industry with several mergers and acquisitions occurring thereby reducing the number of banks from over 70 to about 24.
Source: Copyright © 2006 by Ghana Daily Guide