Ecobank, Sterling Bank discontinue merger talks

The proposed merger between Ecobank Nigeria Plc and Sterling Bank Nigeria Limited may have been discontinued as the two institutions did not foreclose re-opening of talks in future, on business combination agenda.

According to a release issued by both institutions, and made available to newsmen yesterday \”we have agreed not to proceed with the merger, having duly considered the current business climate and the ever-changing dynamics in the market.\”

Both banks, however, admitted that given the inevitability of mergers and acquisition in Nigeria \’s business environment, especially amongst banks, they cannot totally foreclose the possibility of revisiting the talks in the nearest future, if it becomes necessary.

In their words \”we have, however, not foreclosed on the possibility of re-opening the discussions in future.\”

To many financial analysts, however, the latest development is not surprising, given the predating market dynamics and business climate in the country.

According to them, both banks had during the proposed merger in October 2007, stated that the combination was a market induced one which was intended to grow scale, unlike the pre-consolidation merger which was regulatory induced under the watchful eyes of Central bank of Nigeria (CBN).

Unlike a regulatory induced merger, under a business induced merger, the legacy institutions are focused on increasing profits and reducing losses through the reduction of competition, diversification of production, and protection against the liabilities of concentration in a single area.

Ecobank Nigeria , a member of the Pan-African Banking Group based in Lome Togo , courtesy of ETI, maintains its irresistible attribute of a continental coverage. The group has in the last two years, embraced an aggressive growth strategy which sees it bestride across 22 countries covering the West, Central and Eastern African countries so far.

Within the last few months, Ecobank Nigeria has grown phenomenally in branch network to attain over 200 branches in 2007 from its 53 branches in 2005. The bank has also shown strong retail presence in Nigeria through organic growth strategy which has seen it acquiring the deposit liabilities and assets of the defunct All States Trust Bank and Hallmark bank respectively.

Besides its expansion plans, Ecobank is said to have an enviable corporate governance record which continues to endear it to other financial institutions wishing to adopt a combination strategy for growth.

Sterling Bank, on the other hand, boasts of solid pedigree in investment banking – Sterling Capital, ranking among the top three in their business portfolio.

The bank also operates SBG Insurance Brokers; Sterling Registrars Limited; Sterling Asset Management and Trustees Limited, and Safeguard Savings and Loan Limited.

It would be recalled that Sterling Bank\’s group managing director, Mr. Yemi Adeola, had recently, while addressing the press, affirmed that the progress made so far in their merger talks would be communicated to the public early May.

One of the shareholders of Ecobank who spoke on grounds of anonymity was quick to point out that the merger was ordinarily not necessary.

According to him, \”both Ecobank and Sterling bank were on the growth path and needed some time to stabilize the Soludo merger of 2005 before going into a new one.\”

Market analysts insist that, the stocks of Ecobank Nigeria and Sterling Bank, which were placed on technical suspension on Wednesday, November 7, 2007 by the NSE in the wake of their application to merge, should now be lifted to allow for market variables to determine the true value of the stocks. – Guardian