The banking sector saw various activities in Nigeria with the merger and acquisitions plan by Access-Diamond Bank as well as the establishment of a bridge bank, Polaris Bank to take over failed Skye Bank Plc. Two foreign banks, HSBC and UBS, also exited the banking space bringing the number of foreign banks to eight (8) at end-June 2018.
This happened as Nigeria's central bank revealed that 3 commercial banks failed to meet their minimum liquidity ratio of 30%. In the year under review, CBN said,
“The health of Nigerian banks improved following the sustained recovery in macroeconomic conditions, including declining inflation, stable exchange rate and a gradual upswing in the real economy.”
The year also saw a Unity Bank Plc struggling to get investors' injecting funds into the bank at the first quarter of the year. The case happened between Unity Bank Plc and Milost Trust, a US private equity firm.
Here are some developments to watch out for in the Nigerian banking sector in 2019
1. Diamond Bank/Access bank merger to create Africa’s largest retail bank by customers
In December 2018, Nigerian lenders, Diamond and Access Bank agreed to merge and create Nigeria and Africa’s largest retail bank by customers.
The proposed merger involved Access Bank acquiring the entire issued share capital of Diamond Bank in exchange for a combination of cash and shares in Access Bank via a Scheme of Merger.
Based on the agreement reached by the Boards of the two financial institutions, Diamond Bank shareholders will receive a consideration of N3.13 per share, comprising of N1.00 per share in cash and the allotment of two (2) New Access Bank ordinary shares for every seven (7) Diamond Bank ordinary shares held as at the Implementation Date.
Nigeria's central bank (CBN) has given go-ahead for the proposed merger and two banks are currently finalising the elegant deal. When completed in the first half of 2019, Diamond Bank Plc will be totally absorbed by the Access Bank.
These activities will shape the banking industry in 2019. The merger will make Access Bank one of Nigeria's largest bank by customers deposit and asset overtaking Guaranty Trust Bank and Zenith Bank.
From its current third position, Access Bank Plc will move to the top spot in the country.
2. Unity Bank Plc to welcome new investors
After the failed $1 billion investment deal with Milost Global Inc., a New York-based private equity firm in the first quarter of 2018, Unity Bank Plc may see a new investment deal in 2019. This will also shape the banking sector despite electioneering activities.
In November 2018, Oluwatomi Somefun, Unity Bank Managing Director, disclosed that the tier-2 financial institution will soon finalise a memorandum of understanding for an anticipated capital injection with a second largest infrastructure institution in Asia.
Without providing details, the deal will see new investors taking place in the ownership of Nigeria's commercial bank.
3. Polaris Bank
In August 2018, Nigeria's central bank revoked the operating licence of Skye Bank Plc as a result of failure to meet their minimum liquidity ratio of 30%.
The apex bank established a bridge bank 'Polaris Bank,' to secure the assets and liabilities of Skye Bank until a buyer can be found for its operations.
Godwin Emefiele, the CBN governor had said the bank required urgent recapitalisation and can no longer continue to live on borrowed times with indefinite liquidity support from the CBN.
The government, who acts as the owner of Polaris Bank, injected N786 billion into the new bank for its operations.
In 2019, new investors may come on board to buy the bank's assets and take over its operations.
4. Keystone Bank – politics and election
Keystone Bank Plc, Nigeria's tier-2 bank is currently in the midst of political attention as the 2019 election draws nearer.
This is coming as the former vice president and presidential candidate of the People’s Democratic Party, PDP, Atiku Abubakar, accused the President Muhammadu Buhari and his close family member of owning shares in the company.
Atiku had earlier requested the anti-graft agency, Economic and Financial Crimes Commission, EFCC, to investigate the acquisition and shareholders of the bank.
It was swiftly denied by the presidency and a group of investors in the bank. The political development may affect the Nigerian bank in the long run as investors may be wary of the financial institution.
5. International regulations – Basel 3 and IFRS 9
From January 2019, financial institutions in Nigeria will be reporting with the International Financial Reporting Standard 9 (IFRS 9) and the implementation of Basel 3 to meet with global standards.
This development will shape the activities of Nigerian banks as they will have to raise fresh funds to increase their capital base to meet up with regulatory capital adequacy requirements.
Basel 3 will lead to more capital adequacy ratio. The essence of the Basel 3 is to strengthen the regulation, supervision and risk management of banks.