The Sky is not falling! Access bank, Intercontinental Bank M&A

If you have ever bought a 20 year old ‘Tokunbo’ car without having to fix a thing, you can exit this post already and leave to people like us who have and are currently still fixing minor faults here and there with our newly acquired “Tokunbo”. Not saying tokunbos’ are bad buys, just saying “fairly used” don’t come in perfect shape, we find and fix issues so much to deliver expected service. sometimes we assume a perfectionist mindset hoping to transform the same car to a brand new car (if wishes were horses)

That is how simply I can explain what M&A issues are, why they are a necessary part of every M&A and why we customers need to exercise some patience to have them thoroughly fixed.

So in the context of my discussion, Access bought over Intercontinental bank (not sure about what brand of car to illustrate the might of this transaction) but while it is perceived that inter could be the range rover and access the Toyota corolla, I see things a little differently. Access to me is a 2012 Bugatti Veyron, Intercontinental ‘was’ a 2000 dodge viper (that refused an upgrade), insane difference in engine capacity and elegance. So access bought a tokunbo 2000 dodge viper with the task to upgrade to a veyron-ish like dodge (Pimp my ride kinda stunt).

Definitely, both banks run widely different operating models, even their banking application/software is different. To truly come together as one Bank, the platforms and modus operandi must also come together and YES there will be issues.

While I’m not arguing that the once upon a time magical service delivery of access seems to be massively affected, (as expected) as a result of the merger, I’m also saying they deserve a chance to complete the business integration, then we can sit to rate their performance. But if Access can pull this off, not compromising their high level service delivery standards, then this M&A would be perhaps the most memorable.

While it’s obvious they have issues with the system integration process, let us stop spreading un-founded rumors about Access Bank failing. A failing bank never buys another; It struggles to keep afloat.

I am a proud customer of both banks and my expectation is to have the emerged entity deliver quality service maybe better than it used to be with access.

It’s only a corn that hit your head, the sky is not falling…don’t be deceived by Foxel Loxey into a den of no return. access bank is not fading. Its only growing its might and I still think the bank will cause a great upset very soon in terms of the best financial institution in Nigeria.

NB. Access should try sha o! I spent an extra hour trying to cash money last week o! but it’s a cross I’ll bear with you for now…I can’t wait for it to end. + thanks for the light refreshment in your banking halls, it made the wait a little bearable.

All is well that Ends Well: Adieu Intercontinental Bank!!!

I somewhat share a slightly different sentiment on perhaps the most popular business combination (Merger and Acquisition) we have had in recent times. Access Bank takeover of Intercontinental Bank

A lot of folks have questioned the rationale and workability of such a huge project, expressing their dismay at how Access (a frog) could swallow Intercontinental (an elephant). While I understand where most folks are coming from in the sense that Intercontinental bank was the mother of modern day banking in Nigeria with an intimidating back up of resources (financial and infrastructure) enough to blow out its competition into oblivion, I dare to tell you it’s all past glories. The Inter we knew is no longer the one that was acquired. Infact the deception remained largely in its robust retail offering and personal attachment of its loyal customers to the brand. The foundation could no longer hold, critical issues bordering on corporate governance had robbed the bank of its former glory.

An erstwhile unknown access, steadily grew its might over the years, imbibing strict corporate governance and sustainability practices into its operations. this guaranteed them a top 10 finish in Nigeria’s most profitable business as at 2008. At the time I remember telling a friend about the institution and its strategic drive for success. More to their blessing was having an astute business man as the head, aig (as he is called) understood the Nigeria business terrain and worked his life out to make the bank what it is right now. My brother was amongst his recruit at the time and I can remember how he became an alien to us, due to his work, but I loved the fact that he was sold out to the organization’s vision. such was the determination of the access army that provoked the biggest argument on the subject matter, how could they buy over intercontinental bank?

So the question truly is

How could the mother inter leave its workers to the mercy of another? A bank that had the arguably the best employment offer (including a severance pay), 1^st bank to cross the $1 billion in first tier capital

My views.

· The banking sector is a critical part of any economic system, so important that their slip could cost the economy an irrecoverable loss.

· Intercontinental bank and the rest four affected banks were undercapitalized and posed a risk to the entire banking system.

· "The banks lost their money in bad loans

· The excessively high level of non-performing loans in inter was attributable to poor corporate governance practices, lax credit administration processes and the absence or non-adherence to credit risk management practices.

· CBN had to act. the economy needed urgent CPR, the banks (and invariably the economy) needed bailouts.

And so it happened, CBN looked inwards, got them off to indigenous takeover and that is what got us to where we are today.

FIRST BANK, ZENITH, INTERCONTINENTAL, UBA DOMINATE MARKET SHARE- Afrinvest Report.

After subjecting Nigerian banks to stringent stress-tests, Afrinvest, Africa’s leading investment research firm, has reported four banks as dominant in the Nigerian financial market. The banks according to the report released over the weekend said the four banks control between 40.6 and 45.9 per cent of the industry while the remaining 20 banks control between 54.1 and 59.4 of the market. 

  

The breakdown according to the report shows that in terms of total loans the banks control 40.6% in shareholders’ fund, 45.9% in total assets, 40.6% in total loans and 42.5% in total deposits. According to the Afrinvest ‘‘they also dominated market volume. Measured by gross revenues, our analysis reveals precisely the same alignment, with the same four banks between them accounting for 42.0% of estimated industry revenues.’’ 

  

The report revealed that several banks were content to focus on niche business within specialized markets like trade and import finance, large-ticket structured finance, middle-market wholesale trading, capital markets, and real estate financing. In some instances, the analysts observed that some other banks were limited from achieving any degree of operating scale by internal challenges arising either from legacy merger issues, or missed capital raising opportunities during the boom cycle. 

  

Overall, Afrinvest said, “there were rich pickings to be had both as large scale operator seeking market dominance and as a niche operator focusing on specific client markets. Indeed, we note that significant market volatility in 2008/2009 may have created disadvantages to scale, as larger banks may have been insufficiently nimble to react to a fast changing market environment.” 

  

On risk exposure, Afrinvest report stated that ‘‘patterns across banks differ (depending on specific active markets), we did witness a broad enough scope of change in market direction to ensure that all operators will be faced with some degree of exposure to challenging risk positions over the next 12 months.’’ 

  

In conclusion, Afrinvest Researchers noted that the on-going global financial crisis with its attendant implications for sub-Saharan Africa has helped set-up what will be the first major test for Nigeria’s recently consolidated and recapitalized banking sector.  And  Nigerian banks (fresh off three major cycles of successive capital raising and consolidation) are significantly better poised to weather the storms than they would have been without these industry-defining changes. 

  

Nonetheless, rapid growth and easy access to domestic and international capital markets have fueled an expansionary period in risk asset creation that will now be tested under the most severe of market conditions. 

  

Afrinvest Ltd is a London-based independent investment bank. Its focus is exclusively the African markets and it has become the leading provider of African securities to the European investment community in emerging markets. It was created in 1995 identifying a gap in the emerging markets to provide specialized research and investment advice for London-based institutions interested in the African markets. Afrinvest provides all the execution services for international institutional clients seeking to deal in African securities. 

Intercontinental Bank, UBA, First Bank make Forbes top 2000 World's Biggest Companies

At the backdrop of global economic meltdown three Nigerian banks, Intercontinental Bank Plc, First Bank, United Bank for Africa (UBA) Plc made the Forbes list of top 2000 world biggest companies.

They joined 248 other companies around the world to displace same number of companies that featured on the list in the 2008 ranking. This appears to be a confirmation of the 2009 global banking industry. which listed the three banks among top 500 banks in the world.

The global banking industry research and ratings for 2009 has listed First Bank of Nigeria Plc, Intercontinental Bank Plc, Union Bank of Nigeria Plc, Zenith Bank Plc and United Bank for Africa on the World’s top 500 banking brands by the Banker magazine, a publication of the Financial Times of London.

Nigerian banks made their first showing on the world’s top 500 banks in 2007 when Intercontinental Bank came number 355 on the list while also emerging the fastest growing bank in the world. The bank has since then made the list moving up in 2008 to 334.

The banks that made this year’s list had emerged as industry leaders consistently since after the banking industry reforms introduced by the Central Bank of Nigeria in 2004 and industry watchers believe they are going to sustain this position for a long time as their market share keep growing by the year.

Factors accounting for the drop off of the companies that were on the 2008 list but could not make the list in the 2009 ranking, according to Forbes, include mergers, weak financial performance and outright failure.

For instance, Forbes noted that the former 97 th -largest company in the world, Lehman Brothers, fell into bankruptcy, while the weakness in the financial markets led to governments nationalizing some big banks, such as Ireland’s Anglo Irish banks and Iceland’s kaupthing Bank.

For Nigeria, the listing of three of the country’s banks on the Global 200 current listing is a cause for cheers. First Bank Plc is ranked at 1,375 while the United Bank for Africa comes on the list at number 1,560, Intercontinental Bank Plc completes Nigeria’s showing on the list at 1,798.

Explaining the methodology adopted in arriving at the final compilation of the 2000 biggest companies, Forbes says that companies must have a publicity traded stock in order to qualify for the Global 2000. The Global 2000 companies have the top composite scores based on sales, profit, assets and market value.

First Bank Plc’s composite score on the four metric measures shows a sales figure of $1.29billion, a profit stated at $0.31billion, assets metric calculated at 413.05billion and market value stated at $2.89billion.

The United Bank of Africa’s sales figure is stated at $1.44billion with profit at $0.35 while its assets stand at $14.22billion and its market value calculated at 41.43billion.

Intercontinental Bank Plc incredibly returned a higher sales figure that the other two Nigerian banks on the list with its $1.48billion position and a profit position of $0.29billion with assets calculated at $11.90billion and market value adding up to $0.88billion.

Speaking on the report, Microsoft Chief Executive Steve Ballmer said, “ Even a depression is a place for opportunity if you have cash, scale and ambition. Many of the names on this year's Forbes Global 2000 list of the world's biggest companies will emerge on the other side of the trough far stronger when world economies snap back next year. For the strong corporations, there are rivals to buy, technologies to fund and new markets to enter--all at lower prices than we've seen in years. ''Despite the economy, it's important to think about what is possible.''

Forbes' ranking of the world's biggest companies departs from lopsided lists based on a single metric, like sales. Instead, it uses an equal weighting of sales, profits, assets and market value to rank companies according to size. This year's list reveals the dynamism of global business. The rankings span 62 countries, with the U.S. still dominant at 551 members, but that is 200 fewer than in 2004, when we first published this global list.

For the past few years, we have also identified an important subset of the Global 2000: big companies that also have exceptional growth rates. To qualify as a Global High Performer, a company must stand out from its industry peers in growth, return to investors and future prospects. Most of the 130 Global High Performers have been expanding their earnings at 28% a year or better--easy for a start-up, hard for a blue-chip.

The brains behind the Rumors and De-Marketing in the Banking Industry

I refer you to Vanguard Newspaper lead story of 31 March 2009 and a similar story in the Punch Newspaper of 31 March 2009. It appears that the brains behind the rumors and De-Marketing in the banking industry are gradually being unveiled. Information flowing out is indicating that a particular old generation bank is actually spreading rumors targeting customers of Oceanic Bank, Intercontinental Bank and Zenith Bank. It is also becoming clearer that the purpose is to scare off the depositors of the banks and move their deposits to the old generation bank.

There is also clearer evidence in the Money Market that staff of this particular old generation bank are actually spreading rumors about the targeted banks. The CBN should not shy away from bringing the offenders to book, even publicly since it had stipulated punishment for De-Marketing.

De-marketing campaign taken to high-profile customers

Government ministries, corporate organisations and high-net worth individuals are being targeted in a fresh round of “high-level de-marketing” campaign in the banking sector aimed at gaining greater market share of deposits. This is part of the intensified competition in the banking sector, which is giving the monetary authorities a lot of concern.

Some bankers have claimed that the de-marketing strategy, in which rumours are spread about the supposedly precarious state of some banks, is being orchestrated by some first-generation banks to get customers of others to move their accounts and businesses to them.

The banks are said to be deliberately nurturing the perception of being the only “safe” banks to the detriment of rivals.

About a dozen banks have been mentioned in recent weeks as having some form of distress due to the effects of the global meltdown sent to heavyweight depositors and top ministry officials in text messages and unsolicited e-mails.

But the Central Bank of Nigeria and the Federal Ministry of Finance have insisted that all banks are generally safe and that government will prevent any bank failure.

Some industry sources say that the second generation and mid-tier banks are the main victims of this campaign and a few have seen limited run in the past few weeks with staff of some companies and government organisations moving their salary accounts from these banks.

Some bankers had previously accused stockbrokers that were heavily indebted due to losses from margin trading of spreading the false rumours to generate tension in the banking industry.

The stockbroker have since rejected this claim.

The Central Bank of Nigeria is worried that the spreading of such rumours could further undermine the banking sector confidence, and has reeled out sanctions for such unprofessional conduct including hefty fines.

The apex bank’s concerns are hinged on the uncertainties over the banks exposure to the stock market and petroleum products importers who have suffered losses due to the recent depreciation in the value of the naira.

The level of distrust in the system was responsible for the surge in inter-bank lending rates in recent weeks, to which the CBN has responded by expanding its discount window to provide liquidity for banks that might be short of cash.

Insiders said on Monday that at least 18 banks have so far accessed the CBN’s expanded discount window to meet short-term obligations.

A top banker, who did not want to be named said the conduct of rivals amounted to “risky” behaviour.

He said, “We know that the banks are tied together in one way or the other, if one falls, others will follow, so it is in our best interest to keep banks afloat. Even if one only bank fails, there will be a run on healthy banks because customers will say ‘if it can happen to that bank why can’t it happen to mine.’”

Source

Unwholesome practices in some financial institutions

THESE are not the best of times for some of our aristocrats. Neither are things getting better for some of our banks and other financial institutions. As the global economic crisis continues to shoot without missing, individuals and corporate bodies are learning to fly without perching. They are adopting different survival strategies. But the problem now is that while the kite perches, it does not allow the eagle to perch as well. Bear with me if I tend to be speaking in parables. It’s because of the enormity of the problems we will share together here today.

Aliu Eroje

VIEWPOINT 29 MARCH 2009

Last week, African Petroleum Plc came up with a disturbing allegation. In a two-page advertorial in some national dailies, the management of AP accused Nova Finance and Securities Ltd. and Alhaji Aliko Dangote of unethical manipulation of AP shares. This, the company claimed, had led to a decline in value of its shares. Whatever be the outcome of investigations into the matter by the Nigerian Stock Exchange and the Securities and Exchange Commission, it is imperative to note that this type of negative stories is partly why many Nigerians have lost confidence in the stock market.

In the same token, many are also losing confidence in the banking sector. There are variegated rumours regarding the good health or otherwise of our banks. Part of these rumours is that some banks are a few kilometres away from distress. Before the 2004 consolidation exercise in the industry, such a practice was rife. In 2006, the rumour resurfaced. To stem this tide, the Central Bank of Nigeria, in a circular, warned against this trend. Towards the end of 2008, some disgruntled elements in the industry sent text messages indicating that the five banks selected as market makers to arrest the downturn in the stock market, had liquidity problems.

Now, the problem is back. Industry sources attribute this unwholesome practice mainly to the cut-throat competition among top players in the sector. Each of the top five banks is struggling to be the number one. Those in the league of 10 are fighting to be among the first five. And like jilted lovers, they run each other down in what is known as de-marketing.

There is also the Soludo angle to the whole issue. The first term of the CBN Governor expires in May this year. Hence, there are some interest groups angling to take over his position. And the best way to do this, perhaps, is to rubbish his major legacy – the banking consolidation. There are other reasons hinging mainly on the desperation of the banks to stay ahead of competition.

Both the CBN and the Chartered Institute of Bankers of Nigeria had intervened in the past to stop the trend. The CBN Governor, Chukwuma Soludo, has had cause to reassure citizens that our banks are still very strong. He had warned that de-marketing or whatever name they call it would do nothing but undermine the banking system.

Beyond de-marketing, there are some other financial malpractices the CBN needs to look into. One of them is the allegation that most banks indulge in foreign exchange fraud (see our cover story today). Reports at my disposal indicate that these banks use fake international passports to obtain Basic Travelling Allowance, which is usually in dollars. They sell these dollars in the black market in order to make undue profits. This, perhaps, explains why dollar is expensive now. And this is partly why the prices of imported items have risen to the rooftop.

Our major problem is greed; or dishonesty if you like. Elsewhere, billionaires pool resources together to better the lots of humanity. In June 2006, for instance, American billionaire investor, Warren Buffett, announced a donation of almost all his assets to charity. The greatest beneficiary happens to be the Bill and Melinda Gates Foundation. Incidentally, the chairman of the Foundation, Bill Gates, is richer than Buffett who made the donation. Here, our own billionaires fight to discredit one another.

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