First Bank of Nigeria Plc, Fidelity Bank, Stanbic IBTC and Ecobank Nigeria Plc are among Nigerian banks that have shown interest in acquiring some of the bailed out banks. Oba Otudeko, chairman of First Bank told Bloomberg in Johannesburg at the weekend, “We are pursuing one or two of those on offer. Our decision will be based on working with the government and also protecting the best interests of our shareholders. If we acquire, we would acquire at value”

Growth strategy

Fidelity Bank and Ecobank were said to be bidding for Afribank Plc. Emma Esinne, group head of corporate communication of Fidelity Bank said the bank was interested in the ongoing Central Bank of Nigeria effort to reform the banking industry. “We have followed all the processes prescribed by the CBN for those that are interested in acquiring any bank. It is part of Fidelity Bank’s strategy to grow its brand whether organically of inorganically.” He was silent on the bank of choice saying it was too early to disclose its interest.

A source who spoke off record confirmed that Ecobank had actually participated in conducting due diligence on some of the banks. “The CBN had called for expression of interest from local banks as well as from foreign banks and a number of the local banks have conducted their due diligence,” adding that they are only waiting for the next move from the Central Bank. According to the source, Ecobank Nigeria’s bid is being supported by Ecobank Transnational Incorporated ETI which has owns 85 per cent stake in its Nigerian subsidiary.

Moshood Kusamotu, of media relations department of Afribank said any bank can indicate interest in acquiring the bank but would have to go through the process as required by the Central Bank. He said interested banks would have to employ the services of independent financial advisers. “Lets not forget that there are three options that are open. The existing shareholders can recapitalise the bank, the banks can merge or be acquired by another bank,” adding that three options were still open to the parties.

Foreign interest

The local banks will slug it out with Standard Bank Group, FirstRand Limited, and Old Mutual Plc, all three of the largest financial institutions in South Africa, that have also shown interest in the Nigerian market. Sizwe Nxasana, FirstRand managing director disclosed in January that the bank was interest in buying one of the nine banks. “We did register interest in that process. I’m not able to mention (which bank), but we certainly registered our interest,” he told Reuters.

Standard Bank Group already has presence in Nigeria through its subsidiary, Stanbic IBTC and may be pursuing acquisition as part of inorganic growth strategy. According to information posted on its website, it sees further growth opportunities in Nigeria on the back of well-established business and also select acquisitions. “The latter can help us to faster develop our Nigerian business or add market share and scale in select products, infrastructure and business units. We have registered our interest to participate in the next round of consolidation in the Nigerian banking market.”

Negative ratings

Standard and Poor’s, the global rating agency last month raised concerns about the safety of the Nigerian banking industry. John Gibling, managing director for financial institutions at S&P, said there is still a lot to be done by the regulators in order to position the industry for future growth. “The Nigerian banking system is very high risk. The ratings we have for the banks are in the single B category, it’s a very very low level compared to most banks in the world. He said despite the CBN bailout, risk management needs to improve among banks.

A banker who spoke on condition of anonymity said the negative rating by S&P may discourage some of the foreign banks from actualising their acquisition plans unless the CBN would be prepared to sell at a premium. “The foreign banks may insist that the Nigerian banks are too risky based on this report and therefore demand for some incentives from the CBN for them to pick up the banks,” he said.

The Central Bank last year injected N620 billion into eight banks namely Afribank Nigeria Plc, Finbank Plc, Intercontinental Bank Plc, Oceanic Bank International Plc, Union Bank of Nigeria Plc, Bank PHB Plc, Spring Bank Plc, Wema Bank Plc and Unity Bank Plc. Equatorial Trust Bank Plc, still largely individually owned, was advised to be recapitalised by its owner, Mike Adenuga. The CBN said these weak banks would be put for sale in order to improve their financial and human capital base as well as strengthen corporate governance structures in the affected banks.