When Mr. Sanusi Lamido, governor Central Bank of Nigeria (CBN)  said Nigerians has seen the worst in the banking sector, and that with the nationalization of the three rescued banks unable to get suitors to recapitalize has marked the begin of new  and prosperous era in the sector.
Even though many see the nationalization of former Afribank, Bank PHB and Spring Bank as very unpopular, but Sanusi insists that the option was indeed the best considering the circumstance we found our economy.
As analysts and industry watchers wait to see shareholders of banks that have entered into Transaction In Agreement endorse the process at the extra-ordinary general meetings (EGM), many believe that the consummation of the recapitalistion may signal the end to the crisis in the banking sector.
The apex regulators in the financial sector and the Securities and Exchange Commission, (SEC) have given their full support to the TIA agreement of the rescued banks with investors.
All seems to be set for the EGM of the rescued banks and the acquiring banks which is expected to hold before September 30, deadline of the CBN.
Also the Federal High Court in Lagos has granted orders to Oceanic Bank, Intercontinental Bank, Finbank, and Union Bank to convene their court ordered meetings in respect of their proposed recapitalistion transaction.
Many stakeholders have said that the TIA’s is a milestone for the banks, the sector and the economy. A shareholder said the agreement is of critical importance to the economy and called on fellow shareholders to support the process.
According to some analysts even though there the general believe that the deals have been slow when compared with the 2005 consolidation, they argue that times have changed. “The situation this time around is very different. The rescued banks need support and investors have come to give the needed support. The banks cannot be rescued without significant reorganization and the absolute support of a stronger merger partner,” the shareholder said.
Intercontinental Bank’s transaction with Access Bank as outlined in the TIA will be effected through a scheme of Arrangement and subsequent private placement, which will create one of Nigeria’s top four bank brands. Finbank has also entered into a TIA with First City Monumental Bank, which will lead to the recapitalization of Finbank and a subsequent merger with FCMB.
In the same vein Equatorial Trust Bank had signed a TIA with Sterling Bank and the arrangement is on and is making good progress.
Union Bank of Nigeria also entered into a TIA with the African Capital Alliance Consortium, which will lead to recapitalization of the bank with the consortium injecting an initial $500 million of equity and a subsequent $250 million o Tier II capital to take the bank to the minimum capital adequacy and restore one of Nigeria’s foremost banking brands.
Oceanic Bank also entered into TIA with Ecobank Transnational Incorporated (ETI). The arrangement will enable the bank recapitalize. It is expected that at the Oceanic Bank will merge with ETI’ Nigerian subsidiary, Ecobank
The on-going merger and acquisition among Nigerian banks would definitely throw up some changes in the sector.
Analysts say the merger will change the composition of top five banks in the country.
Intercontinental Bank and Access Bank currently Nigeria’s sixth and eight banks in terms of assets share will by their merger may become third by assets and deposits, displacing United Bank for Africa to fourth.
Ecobank Nigeria and Oceanic Bank merger is expected to produce a bank that will rank fifth by assets and deposits. The FCMB and Finbank merger will come to the the eighth position by assets and deposits
Analysts say that size, liquidity and capital will going forward define the leaders in the banking sector.
Oceanic Bank with 376 branches and Ecobank Nigeria 240 branches will give the new entity about 630 branches nationwide, making it the second or third largest bank in Nigeria by network.
However some banks would still maintain their position. For instance First Bank and Zenith would maintain their original position on the list of leading banks in terms of assets and deposit, even though there some of the previously middle size banks would move to the top there by creating more top level concentration.
Analysts say the situation would create serious competition. The CBN’s policy on cashless society would be benefited more by the larger banks, as deployment of e-banking platforms across the country from June 2012. They argue that   the big banks would have an edge, by virtue of their high customer numbers and geographical reach. “These banks will clearly have a better understanding of sector, which would place them in good stead to translate to a good return..
According to Mr. Aigboje Aig-Imoukhuede, managing director\CEO, Access Bank, the lengthy period of time since the initial announcement of this transaction to the current stage is a testament to the importance placed on due diligence and best practice by parties involved, adding that the institution have left no stone unturned in obtaining the necessary approvals and carrying along all stakeholder”.
Imoukhuede said concerning Access Bank and Intercontinental Bank both parties painstakingly went through the required procedure. “It is worthy of note that both institutions have deliberately and painstakingly in taking steps to see that due diligence is carried out to the letter. He said both parties hired world class advisers, who have world-view of similar transactions.
“Also for such high impact transaction, people, culture and leadership are the game breakers or makers. The purposeful and focused leadership in both banks have taken all necessary steps to ensure their respective institution complies with all regulatory requirements and adheres to international best practices”, Aig-Imoukhede said.
MR. Bismarck Rewane, managing director Financial Derivatives Company Limited, has said the mergers are a welcome development as it reduces systemic risk in Nigeria’s banking sector. “The alternative would have been to liquidate the banmks and it would be risky for the economy.