Nigeria will soon witness another round of merger and acquisition in the banking sector as financial advisers are putting finishing touches to a merger arrangement between First Bank of Nigeria, Heritage Bank and Polaris Bank.
A source privy to the merger informed reporters that both Polaris and Heritage have been looking for a worthy bank to do business with as they have been told by the apex bank, the Central Bank of Nigeria (CBN), after a round of stress test in banks last year to shape up or lose their licence.
The source also informed that these three entities are vigorously pursuing the merger and acquisition talks across all available means.
It was gathered that Polaris Bank, formerly Skye Bank, for instance, which is currently under the Asset Management Corporation of Nigeria (AMCON), is up for sale since it became a bridge bank in 2018.
The CBN had stated in October last year that seven commercial banks in the country failed stress test in adequate funding at the end of 2018.
In a financial stability report published by the bank, it was revealed that in less than 30-day period analysis, seven Nigerian banks were not adequately funded, while in the 31-90 days bucket, nine banks had funding gaps.
Overall, the cumulative position for the industry showed an excess of N4.8 trillion assets over liabilities.
The banking regulator, however, did not mention the names of the seven of the banks but it privately informed the affected banks to look into the possibility of merger and acquisition to prevent a total collapse.
A financial expert, Tola Odukoya, Chief Executive Officer, FSL Asset Management Limited, said the merger will bring good tidings to the banking industry.
“It will lead to fresh consolidation exercise in the banking industry. You know that Polaris is currently under the Central Bank of Nigeria, I mean it is an AMCON bank. We were made to understand last year by the CBN that it may call for recapitalisation of some banks”.
He added that a merger between these three banks will probably birth the biggest bank in the country.
“You know we have more banks than we used to have before with the issuance of banking licence to some merchant banks and regional banks.
“Within this our current economic situation one may ask what are these banks doing? Are they providing banking services to the people? Are they offering proper banking intermediation?
“To that extent, the merger to me is welcomed. I am of the opinion that it is better to have 10 percent in a big bank than to have 100 percent in a bank that is drowning.