Access Bank : How Access, Diamond Bank Merger’ll Trigger Fresh Competition among Banks

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. 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 meet 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.