A critical business axiom presumes that a sound and competent banking sector is essential for a stable macroeconomic environment. Therefore, the importance of commercial banks in a country’s economic and industrial development cannot be overemphasised.
This is because they occupy key positions in a country’s financial system and are essential agents that would lead to the growth of any economy.
Banks also provide the bulk of money supply as well as the primary means of facilitating the flow of credit, an indication that the economic well-being of a nation is a function of advancement and development of its banking industry. As a result, the banking sector in Africa and Nigeria in particular has improved significantly due to impact of globalisation in terms of technology, regulations and structure.
In achieving enhancement of capacity to support growth in the real sector, there is ample evidence that the Central Bank of Nigeria (CBN) relied heavily on bank capital reforms in tackling problems of under-performance in the sector.
Implementation of these reforms has often led to strategies, which include merger and acquisitions – the two common strategies adopted in the implementation of consolidation programmes.
According to Investopedia, Mergers and Acquisitions have been shown to promote synergy in business operations as the performance of the emerging organisations is often better than the sum of individual performances prior to the consolidation.
Hence, the fusion of two or more banks into a unified entity is expected to promote operational performance through improved competition, exploitation of economies of scale, facilitation of adoption of advanced technologies and higher level of operational efficiency.
Ultimately, the goal is to strengthen the intermediation role of banks and to ensure that they are able to perform their traditional role of enhancing economic growth as well as increasing customer base alongside palatable product offerings. This thinking clearly influences the ongoing corporate marriage between Access Bank Plc and Diamond Bank Plc.
The deal, which is expected to be completed in the first half of 2019, is set to birth over 29 million customers which would be basically the largest customer base of any bank on the continent. This might also constitute about 600 branches, about 33,000 Point of Sale (POS) terminals as well as 13 million mobile customers.
Also, the two banks are set to have the largest alternative network channels even as both financial institutions can now use their combined total of 3,100 Automated Teller Machines (ATMs).
Following the signing of the Memorandum of Agreement and announcement of headline terms, which valued Diamond Bank at approximately N72.5 billion (about $200 million), will see Diamond Bank shareholders receive N3.13 per share in cash and shares. This means that Diamond Bank shareholders would receive a consideration of N3.13 per share, comprising N1 per share in cash and the allotment of two new Access Bank ordinary shares for every seven Diamond Bank ordinary shares held as at the implementation date.
Group Managing Director, Access Bank, Herbert Wigwe, noted that the combination of the two businesses will create the largest retail bank in Africa by customer base and a very significant player in the Nigerian market while adding that this represents a huge step towards the delivery of the bank’s goal to bring the power of banking to millions of people across Nigeria and an exciting transaction for Access Bank and Diamond Bank’s customers, staff and shareholders.
Similarly, Chief Executive Officer, Diamond Bank Plc, Uzoma Dozie, said the merger is positive for all of Diamond Bank stakeholders, including customers, employees and shareholders, adding that customers will benefit significantly through the unrivalled combination of the best of Diamond Bank’s retail and digital leadership with the size of Access Bank’s balance sheet, corporate names and geographical reach.
“Customers are at the heart of our decision to create one of Nigeria’s leading banks. The combination of Access Bank and Diamond Bank will result in real benefits. The products and services that Diamond Bank’s clients enjoy, including its commitment to digital innovation, will continue unchanged and will be backed by Access Bank’s own commitment to customers, financial inclusion and sustainability, and the bank’s corporate expertise and strong balance sheet,” Dozie said.
With the deal in place, the investing community remains skeptical as they await the outcome of the merger even as customers of both banks are worried about longevity of products afforded to them.
For instance, former President, Noble Shareholders Association, Sir Timothy Adesiyan, said, “instead of CBN throwing all our shares into the lagoon, at least we are going to have in exchange, Access Bank shares and we appreciate it rather than having nothing.”
National Chairman, Progressive Shareholders Association of Nigeria (PSAN), Boniface Okezie, called for calm among the investing community.
Okezie said, “if Diamond Bank is operating 200 branches, considering the merger, Access Bank will be a mega bank. I do not think there is any reason to panic as Access Bank is not new to the terrain; they know what they are doing and they must have done their homework to find out whether after the whole merger thing is done, they will still remain solid.”
Also speaking, Head, Retail Banking, Diamond Bank Plc, Robert Giles, while assuring Nigerians that the merger between Diamond and Access Banks will bring the best of strong core print in treasury platform as well as the best of retail banking, noted that uique products such as DiamondXtra, Xclusive Plus, High Interest Deposit Account (HIDA), Diamond Business Advantage (DBA) and Diamond Beta will remain even after the merger is completed.