Emeka Okoroanyanwu
The planned merger of Access Bank Plc and Diamond Bank, which took stakeholders by surprise last week, may trigger a fresh competition among money deposit banks in the country. The merger if it pulls through is expected to create the largest bank in Nigeria by assets size, a position Zenith Bank plc with an asset base of N5.595 trillion as at December 31, 2017, occupies at present, and which it is not ready to relinquish without a fight, going by the prestige and business status it confers on the money lender.
First Bank which comes second with N4.949 trillion and GTBank with N3.335 trillion and third in assets base are also not likely to give up their positions without a push.
The coming year, therefore, is likely to be very challenging in the banking industry based on the steady and continuous slide in the price of crude oil in the international market, a situation that has eroded the profitability of many banks, in an economy that depends 80 per cent on oil revenue and public sector funds.
For a bank to be profitable and remain in the front seat in the years ahead, such would of necessity need to grow its size both in assets and shareholders’ funds. Next year, therefore, is likely to be a high pressure year for Nigerian banks in terms of maintaining their held positions and seeking for new businesses.
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Therefore, the size of a bank, especially its assets base and shareholders’ funds would determine the type and level of business it would likely accommodate. And with the general elections coming up in the first quarter of 2019, banks are likely to face increased pressure on their finances as politicians would move for the available funds to support their campaigns.
Thus to hedge against collapse and to met up with obligations to their customers, banks may likely be rushing to the Central Bank of Nigeria (CBN) credit window or the Capital market to raise funds either by Rights Issues, Public Offer or both. The big four: Zenith, First Bank, GTBank and Access, because of their size, may not likely feel much of the pressure but for the middle level and small banks, there would certainly be increased pressure on their finances and their vaults. This may trigger mergers or acquisitions.
As at today, Zenith Bank still remains Nigeria’s biggest bank in all parameters, that is, assets, shareholders’ funds, and profitability. Its shareholders’ funds as at December 31, 2017 was N822 billion. It is followed by merged Access Bank with a total of N738 billion.
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First Bank has N678 billion and GTBank N625 billion. It is expected that other banks may be in the race to grow their capitals either through mergers or approaching the capital market to seek for funds as the merger between Access Bank and Diamond will give rise to about N5.817 trillion in asset size as at December 31, 2017. This other top banks would strive to match or surpass. This would be followed closely by Zenith Bank, whose total assets stood at N5.595 trillion as at December 31, 2017; First Bank – N4.949 trillion and GTBank N3.351trilion.
Zenith Bank also leads other banks in profitability with N203 billion Profit after tax as at December 31, 2017. It was closely followed by GTBank which recorded N200 billion and UBA’s N103 billion. Access Bank followed at N80 billion.