Sterling Bank Plc is planning to buy one or two mid-sized commercial lenders before the end of the year, The Nation has learnt.
Investigations showed that the lender is seriously eyeing Keystone Bank Limited the last of the three bridged lenders bought by the Asset Management Corporation of Nigeria (AMCON).
Sterling Bank an insider source said, is also considering buying another mid-tier lender with strong presence in the northern part of the country.The targeted bank has been grappling with low liquidity in recent months due to sharp falls in the value of the naira, crude oil prices and increased regulatory pressure.
Sterling Bank’s Chief Finance Officer, Abubakar Suleiman, told Reuters that these factors are forcing banks to recapitalise. He said his bank expected a further 20 per cent devaluation in the naira, eroding capital ratios for several of its rivals exposed to foreign currency assets and potentially triggering mergers.
Investigations showed that the lender is seriously eyeing Keystone Bank Limited the last of the three bridged lenders bought by the Asset Management Corporation of Nigeria (AMCON).
Sterling Bank an insider source said, is also considering buying another mid-tier lender with strong presence in the northern part of the country.The targeted bank has been grappling with low liquidity in recent months due to sharp falls in the value of the naira, crude oil prices and increased regulatory pressure.
Sterling Bank’s Chief Finance Officer, Abubakar Suleiman, told Reuters that these factors are forcing banks to recapitalise. He said his bank expected a further 20 per cent devaluation in the naira, eroding capital ratios for several of its rivals exposed to foreign currency assets and potentially triggering mergers.
Sterling Bank CEO, Yemi Adeola, disclosed late last year that six
commercial banks are likely to seek mergers and acquisitions this year.
The mergers, he said, are triggered by the shock created in their assets
and balance sheet sizes in the face of declining oil prices.
Crude oil prices have fallen to as low as $32.11 per barrel from over $110 per barrel a year ago. This has adversely affected banks’ oil assets. Besides, the level of non-performing loans in the sector has risen.
Adeola said he envisaged possible shrinking in the number of local banks this year. There are already moves suggesting that trend, he said, but did not name any bank.
The bank chief said two international banks were discussing with local lenders on possible acquisition. He said last year was a challenging one for the economy and the banking sector, adding that banks are now finding ways to wriggle out of these challenges, including a tough regulatory environment.
He said oil price could also drop further, and called for a more efficient tax system, blocking of revenue leakages and focus on areas neglected in the past – “from agric to solid minerals and other commodities we have in abundance. We also need to support Small and Medium Enterprises to create opportunities that will create jobs,” he said.
Adeola said the Nigerian banking industry was the most regulated sector in the country thereby affecting banks’ performance. “To say that everything will be rosy in 2016 will be deceiving ourselves. I think if the opportunities arise for banks to pursue further consolidation, we could see two or three. I also know that one or two international banks are interested in pursuing acquisitions in Nigeria and they are indeed having discussions already.
“So, you could see a combination of one or two international banks taking over one or two Nigerian banks or merging with them. And nothing also stops two or three Nigerian banks having merger discussions in 2016”, he said.
Adeola said Sterling Bank is ready for either a merger or an acquisition, provided it will add value to stakeholders. “For us at Sterling Bank, we are always open to mergers or acquisitions. We are open to anything that can give us scale. Whether it is a merger or acquisition, we are open, but the synergy must be there. We must see the benefits clearly. Any merger must be one that ensures stakeholders will benefit more; otherwise it will not be worthwhile, he added.
Adeola added: “We have every cause to remain optimistic in 2016, despite the fact that it is going to be a challenging year for the banking sector. We are determined to keep the momentum going. We first started a merger of five banks, and all the consultants predicted that all the entities will struggle for the next 10 years. It was challenging but we got out of it. Experience has shown globally, that mergers don’t work, especially when you are merging five institutions.”
Crude oil prices have fallen to as low as $32.11 per barrel from over $110 per barrel a year ago. This has adversely affected banks’ oil assets. Besides, the level of non-performing loans in the sector has risen.
Adeola said he envisaged possible shrinking in the number of local banks this year. There are already moves suggesting that trend, he said, but did not name any bank.
The bank chief said two international banks were discussing with local lenders on possible acquisition. He said last year was a challenging one for the economy and the banking sector, adding that banks are now finding ways to wriggle out of these challenges, including a tough regulatory environment.
He said oil price could also drop further, and called for a more efficient tax system, blocking of revenue leakages and focus on areas neglected in the past – “from agric to solid minerals and other commodities we have in abundance. We also need to support Small and Medium Enterprises to create opportunities that will create jobs,” he said.
Adeola said the Nigerian banking industry was the most regulated sector in the country thereby affecting banks’ performance. “To say that everything will be rosy in 2016 will be deceiving ourselves. I think if the opportunities arise for banks to pursue further consolidation, we could see two or three. I also know that one or two international banks are interested in pursuing acquisitions in Nigeria and they are indeed having discussions already.
“So, you could see a combination of one or two international banks taking over one or two Nigerian banks or merging with them. And nothing also stops two or three Nigerian banks having merger discussions in 2016”, he said.
Adeola said Sterling Bank is ready for either a merger or an acquisition, provided it will add value to stakeholders. “For us at Sterling Bank, we are always open to mergers or acquisitions. We are open to anything that can give us scale. Whether it is a merger or acquisition, we are open, but the synergy must be there. We must see the benefits clearly. Any merger must be one that ensures stakeholders will benefit more; otherwise it will not be worthwhile, he added.
Adeola added: “We have every cause to remain optimistic in 2016, despite the fact that it is going to be a challenging year for the banking sector. We are determined to keep the momentum going. We first started a merger of five banks, and all the consultants predicted that all the entities will struggle for the next 10 years. It was challenging but we got out of it. Experience has shown globally, that mergers don’t work, especially when you are merging five institutions.”
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