Nigeria's FirstBank Set To Merge With Heritage Bank, Polaris Bank to boost the banking sector

LAGOS – Nigeria will soon witness an­other round of merger and acquisition in the banking sector as financial advisers are putting finishing touches to a merger arrangement be­tween First Bank of Nigeria, Heritage Bank and Polaris Bank.

A source privy to the merger informed Daily Inde­pendent that both Polaris and Heritage have been looking for a worthy bank to do busi­ness with as they have been told by the apex bank, the Cen­tral Bank of Nigeria (CBN), after a round of stress test in banks last year to shape up or lose their licence.

The source also informed that these three entities are vigorously pursuing the merger and acquisition talks across all available means.

Daily Independent gath­ered that Polaris Bank, for­merly Skye Bank, for instance, which is currently under the Asset Management Corpora­tion of Nigeria (AMCON), is up for sale since it became a bridge bank in 2018.

The CBN had stated in Oc­tober last year that seven com­mercial banks in the country failed stress test in adequate funding at the end of 2018.

In a financial stability re­port published by the bank, it was revealed that in less than 30-day period analysis, seven Nigerian banks were not ad­equately funded, while in the 31-90 days bucket, nine banks had funding gaps.

Overall, the cumulative po­sition for the industry showed an excess of N4.8 trillion as­sets over liabilities.

The banking regulator, however, did not mention the names of the seven of the banks but it privately in­formed the affected banks to look into the possibility of merger and acquisition to prevent a total collapse.

A financial expert, Tola Odukoya, Chief Executive Of­ficer, FSL Asset Management Limited, said the merger will bring good tidings to the bank­ing industry.

He said, “It will lead to fresh consolidation exercise in the banking industry. You know that Polaris is current­ly under the Central Bank of Nigeria, I mean it is an AMCON bank. We were made to understand last year by the CBN that it may call for recap­italisation of some banks”. ­

He added that a merger be­tween these three banks will probably birth the biggest bank in the country.

“You know we have more banks than we used to have before with the issuance of banking licence to some mer­chant banks and regional banks.

“Within this our current economic situation one may ask what are these banks do­ing? Are they providing bank­ing services to the people? Are they offering proper banking intermediation?

“To that extent, the merger to me is welcomed. I am of the opinion that it is better to have 10 percent in a big bank than to have 100 percent in a bank that is drowning.

“I think it is going to be a good thing. You can see what is happening in Access Bank now. The merger with Dia­mond Bank has made it the biggest bank in the country and with this First Bank, Heritage and Polaris Bank proposed merger, we may see the unveiling of the big­gest bank in the country this year”, Odukoya added.

Anor Anyanwu, former Executive Director, Main­street Bank, said the merger is not impossible.

He said the merger will lead to the emergence of the biggest bank in the country.

“If FirstBank, with its fi­nancial muscle, is able to ac­quire these other banks that will be good for the country as it will become the biggest bank in the country.”

“But this”, he said, “comes with some drawbacks.”

He said there will be dupli­cation of branches because of the spread of FirstBank.

“Now that banking is moving away from bricks and mortar branches, some people will lose their jobs and some branches will need to close to achieve profitabili­ty”, Anyanwu said.

First Bank is the oldest bank in the country and it operates a network of over 750 business locations across Africa, the United Kingdom and representative offices in Abu Dhabi, Beijing and Johannesburg set up to cap­ture trade-related business between geographies.

FirstBank’s ownership is diversified, with over 1.3 million shareholders. The bank was founded in 1894. It converted to a public compa­ny in 1970 and was listed on the Nigerian Stock Exchange (NSE) in 1971. However, as part of the implementation of the non-operating holding company structure, it was delisted from the NSE and replaced with FBN Holdings Plc. in 2012.

Heritage Bank is a large fi­nancial services provider in Nigeria. Currently licensed as a national bank, it offers bank­ing and financial services in the country, including the South, West, South East and the North.

Polaris Bank, on the other hand, traces its origins back to 1989 when Prudent Bank Plc. was incorporated as a lim­ited liability company. In 1990, the bank was issued a licence as merchant bank. That same year, it re-branded as Prudent Merchant Bank Limited. In 2006, Prudent Merchant Bank Limited merged with four oth­er banks to form Skye Bank Plc. These are Bond Bank Limited, EIB International Bank Plc., Reliance Bank Limited and Co-operative Bank Plc.

In 2014, the bank acquired Mainstreet Bank Limited.

On September 21, 2018, Godwin Emefiele, the gov­ernor of CBN announced in Lagos that the apex bank had revoked the operating licence of Skye Bank. Emefiele also stated that the assets and li­abilities of the bank would be taken over by a new enti­ty, Polaris Bank, due to the inability of the Skye Bank’s shareholders to adequately re­capitalise the bank after the 2016 intervention.