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Acquisition/Merger: First Bank: living up to systemic challenges?

Market related information, whether speculative or otherwise has a way of impacting on the performance of target equities.

This manifested in the market in 2019, when report on the probable new investment in Japaul Oil and gas, led to run on Japaul shares, but the report turned out to be false, and gains recorded by Japaul triggered by the report on the new investors, withered.

Last week, cases of a top tier Nigeria bank wanting to acquire one second and tier 3 bank, as well as another tier one bank, wanting to acquire a first generation bank thrilled stakeholders in the outgone week.

The stories that trended the week ended Friday March 13th, 2020, reeled around fresh bank acquisitions in Nigeria that may be executed in due course, one of such stories was published in one of a Daily Newspaper, not Westafrica BusinessNews, on First Bank, wanting to acquire Polaris Bank and Heritage bank.

First Bank of Nigeria Limited (FirstBank) ranks as the premier Bank in West Africa and the leading banking services solutions provider in Nigeria for over 125 years.

Listed in the FINANCIAL SERVICES sector of the Nigerian Stock Exchange (NSE) and in the Other Financial Institutions subsector on the premium board of the bourse.

As at the close of trade on Monday March 16th, 2020, FBNH closed with market capitalisation of N132, 812,583,330.40 billion and 35,895,292,792 billion outstanding shares, assumed to be one of the largest in the market.

With over 750 business locations and 44,000 Banking Agents spread across 99% of the 774 Local Government Areas in Nigeria, FirstBank provides a comprehensive range of retail and corporate financial services to serve its over 15 million customers.

With a 52 weeks high equity pricing of N8.30 per share and 52 weeks low pricing of N3.60 per share, the stock closed trade Monday at N3.7 per share , following decline by N0.3 per cent.

Meanwhile, during the week ended Friday March 13, 2020, the First Bank of Nigeria (FBN) Holdings shares, remained on top demand by investors, who may ostensibly, have received a hint on the probable new status of the bank if the acquisition stories turn out to be true. First bank is the major subsidiary of FBN Holdings Plc.

For instance, the bank’s uptick in activity commenced mid-January and peaked last week ended Friday March 13, 2020, and expected to sustain the tempo in subsequent weeks.

Analysing trends of the bank’s performance in the activity chart last week showed that, FBNH sustained notable presence on the top active stocks chart for throughout last week, with a total volume of 619 million shares transacted within four days.

Friday, March 13, as the third most active stock, FBNH recorded a total turnover of N120, 089,184 million shares, from the fourth position recorded on Thursday, March 12, with turnover of 31,947,943 million shares.

On Wednesday, March 11, FBNH, as the third most active stock, recorded 303,031,738 million shares, while on Tuesday March 10, FBNH as the second most active stock, posted 163,963,177 million shares.

Interestingly, the bank ruled the week with dominant presence in the top active stocks chart.

Westafrica BusinessNews gathered that  top source at Polaris Bank had earlier divulged  that the news about merging Polaris Bank, formerly Skye Bank with First Bank, manifested  within the offices some week past.

“It is true, in-house, so many discussions around the merger recently. But I think the discussions are still at the prime stage of regulatory hurdles. You know Polaris is a bridge bank. So it will require more talks from both parties,” the source was quoted to have said.

Last Thursday, the story on the merger talks become of public knowledge, it was revealed that “financial advisers of the banks are putting touches on a merger arrangement between the three banks.”

“If the banks are acquired by First bank, investors will have value and the first bank will leverage on their strengths, to break new grounds, if the management will focus on growth and returning value to shareholders, and “also the banks may be reacting to the recapitalisation rule by CBN and that makes it possible for the acquisition or merger operations to sail through easily” noted a stakeholder who preferred anonymity.

The prior week, the FBNHolding Company’s shares closed the week on March 06, 2020 as the fifth worst decliner, losing N0.4 or 6.96 per cent, to close the day at N5.35 per share.

Confirmation that the acquisition talks may have commenced towards the end of 2019 and gathered momentum towards the end of the first quarter 2020, may be seen through the stock’s performance in the first two months of the first quarter, having considered the rising demands in March.

The Friday March 06 decline was on the back of N0.5 or 9.71 per cent gain recorded on Wednesday March 04, 2020, which lifted the company’s share price to N5.65 per share.

The banking conglomerate on March 04, emerged as the most active stock with 50,254,175 million shares, worth N279, 755,430.00 million, having on March 03, closed as the fourth most active with 32,194,331 million shares, worth N163, 432,663.75 million

Monday March 02, as the fifth most active stock, FBNH polled 16,763,899 million shares worth N79, 074,023.7 million.

FBNH opened the year on January 02, as the third highest gainer with N0.35 or 5.69 per cent growth in share price, to end the first trading session of the year at N6.5 per share.

On January 06, the stock close trade as the fifth most active with 26,390,793 million shares worth N182, 686,192.45 million, marking its entrance in the top five activity chart for the year.

January 07, FBNH clinched the third most active stock position with 34,717,858 million shares, worth N240, 979,833.05 million, and on Wednesday January 8th 2020, closed as the fourth most traded with 69,397,755 million shares, worth N524, 563,565.65 million.

On January 14, FBNH closed trade as the fifth most traded stock with turnover of 21,974,830  million shares , worth N157,614,142.25 million, while January on 20, the group  closed the day’s session as the 4th most active stock with 22,809,275 million shares , valued N171,897,839.65 million.

In January, FBNH was yet to garner momentum on demand, which somewhat increased in February and peaked in March.

On February 27, FBNH stock closed the month as the 5th most active, having appeared as the fifth top gainer on February 25. Feb 20, closed as the top five most active stock, and on February 18th, as the third highest loser and fifth top active and on February 14, ended as fifth most active.

On February 12, the stock closed as4th most active, February12, closed as 4TH most active and on February 10, closed as the top five loser and also most active with 35,908,568 million shares worth N212, 055, 243, 75 million.

On February 07,closed as 4th most active with N15,756,062, worth N94,838,527,05 million, while on February 6th peaked as the most active stock with 57,284,508 shares , worth N345,559,540.68 million.

On February 5th and 4th , FBNH stock emerged as second most active with 47,129,635 million shares , worth N277,814,781.25 million and 32,655,512 million shares, worth N193,689, 579.05 million.

Reactions have trailed the reports of acquisition of Heritage and Polaris Banks by First Bank of Nigeria Limited, major subsidiary of FBNHoldings Plc, and also alleged report of possible acquisition of Union bank by Zenith Bank.

However, while stakeholders expressed divergent reactions as the discursion rages, FBN Holdings, parent company of First Bank Nigeria Limited emerged with a reaction to the purported bid to acquire two banks.

Titled “Re- Request for clarification – First Bank set to merge with Heritage Bank, Polaris Bank” the document signed by the FBH Holdings company Secretary, Seye Kosoko said that the explanation was with respect to the online publication on the largest subsidiary of the FBN Holdings Plc, First Bank of Nigeria Limited, by a Daily Newspaper, not Westafrica BusinessNews , on March 12th ,2020 captioned “ First Bank set to merge with Heritage Bank, Polaris Bank” and quoting rule  17.10 of the rule book of the Exchange 2015, stated that “’ recent events in the industry have thrown up merger and acquisition opportunities for banks and that “’ it is therefore not unexpected that Analysts will continue to share viewpoints about the evolution of potential consolidation in the Nigerian banking industry”

The FBNHoldings report added that “’ there will always be speculations on First Bank’s involvement on account of its size, liquidity, systemic importance and historic support in backstopping the industry” adding that “’ Inorganic growth remains a strategic consideration for all financial institutions, but from First Bank’s perspective, will only be considered when it is value accretive  to shareholders and other stakeholders”

FBNHoldings maintained that “Similar to other Nigerian Banks, First Bank continues to scan sub Saharan Africa in general for potential acquisitions”’ and that “ FBNHoldings Plc  is mindful of its responsibilities a s premium board listed company and will make appropriate disclosures , should it find such values”

CEO, Crane Securities, Mike Eze, who had earlier spoken with Westafrica BusinessNews on expectations from First Bank, said that First bank reflects that by 2021, the bank is likely to reassess their performances and chart the way forward, following the three years grace given earlier, to clean up their toxic assets, of which positive results have started manifesting.

“They felt that their income will take care of the bad debts, and that they have been doing. The promise they made then was that in the next three years, they will be able to clean up the toxic assets in their books and they have been doing that effectively. We are expecting that at the end of 2021 they should be able to reassess their performance and know what to do next.

First bank is always first, they are always first, and you begin to realise it   when they have erased their debts overhang, and the robust dividend that they will be paying, no doubt, their share price will also become robust.

He said “’First Bank recently has tried, through their performances, they have been reducing the exposure they have over the years. Recently the bank has been doing well, they are improving year on year and we are expecting that their performance for 2019 financial year which is being expected will be better that the previous year. I see them also, as being able to return something higher for the shareholders this year, Eze said “It is their debt over hang that has been affecting their performances in the past, but now talking about facts behind the figures, those old generation banks, there are some loans they gave out in the past that led to their large debt overhang”

BY Bonny Amadi

 

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