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Nigeria’s first mega bank is born

by Business News Report

By Omoh Gabriel and Babajide Komolafe
FIVE banks have in principle to merge. The banks are Allstates Trust Bank, Gulf Bank, Hallmark Bank, Lion Bank and Universal Trust Bank. The banks come together on Friday to sign a memorandum of understanding to work out details of the merger. The coming to force of the arrangement is however subject to approval by the Central Bank of Nigeria. The deal which was brokered during the weekend saw representatives of the five banks coming together to agree on the modalities for the merger. The decision of the five banks to merge saw family egos and ethos shelved as representatives of the five banks agreed to form an alliance, which is seen as a forerunner to the emergence of Nigeria’s first mega merger in banking history.
Representatives of Allstates Trust Bank, Gulf Bank, Hallmark Bank, Lion Bank and Universal Trust Bank met behind closed doors in Lagos, in a meeting that lasted over four hours and ended with a Memorandum of Understanding signed by all the parties.
The project, which is the First Consolidated Bank in Nigeria, subject to CBN approval, is pooling together the shareholder funds of these bank which is in excess of the N25 billion required by the apex bank as minimum capital base. As at the end of 2003 financial year Allstates Trust Bank had a cpital base of N3.2 billion, Gulf Bank N5.5 billion, Hallmark Bank N4.6 billion, Universal Trust Bank N3.3 billion. The figures for 2004 are not yet available. The five banks have a combined nationwide branch office network of close to 200 spread across the six geo-political zones in the country, which puts the project in the top three bracket in earnings, deposits, assets and balance sheet size in the country.
It was a project in history that shocked the market and observers at the weekend given the personalities and the size of the individual banks involved in the talk of “merger of equals and partners with shared values and vision.”

Each member of the group could as well have gone it alone but the banks saw the vision of the CBN to create Nigerian banks capable of playing a global game on global terms as well as to further entrench the practice of good corporate governance in the marketplace.
The enabling environment created by the recent pronouncement of the CBN has made the merger process more attractive and viable in Nigeria and allowed banks to truly come together and complement one another with their various skills.
A significant kernel of the consolidation according to sources was borne out of the desire to create a mega bank capable of playing in the global arena and handling big ticket transactions, which hitherto was a preserve of overseas banks.
Other possible impetuses for this proposed merger include the desire to capture the over N400billion outside the formal sector of the economy and improve on the range of services available to its customer base. A merger of this kind is sure likely to create even more employment opportunities.
A source added that such an awesome, expansive and intimidating combination is set to challenge routine banking practices and druggy brands in the industry. This will be the largest combination of banking talents under one roof with a combined history of over three decades of experiences in best banking practices, both locally and internationally.
Meanwhile, a meeting is scheduled with the CBN over the alliance mid-week in Abuja for further discussion.
But officials of the banks involved in the talk are not commenting yet on the matter.

FILE NAME: MERGER September 5, 2004

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