Etim Etim and Victor EzejaLike the Biblical Joseph’s dream wherein tiny hungry-looking cow swallowed up a fat one with so much ease, the news of the purchase of 104-year-old bank by a two-year-old gripped national attention as 2021 draws to a close.
No doubt, Union has always been in the line of sight of many corporate titans. Its pre-colonial ancestry, broad retail customer base and nationwide branch network had always made it an attractive brand for a bank with inorganic growth ambitions. Access Bank, at a time, made a move for it, but changed its mind.
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Two-year-old Titan Trust Bank is owned by the DGI Group, a conglomerate of 24 companies, the most popular of which is Chi Limited which was recently sold to Coca Cola for a mouth-watering $1bn,
GDI Group is in almost every sector of the economy; from Agribusiness to Pharmaceuticals, FMCG to Trading, among others.
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Titan, which has just had its first foray into Nigeria’s financial services sector with the Union Bank acquisition, simply began operations in he last quarter of 2018. It has the ambition to become a tier 1 bank within a maximum of seven years, which presupposes that it would always going to pursue inorganic growth.
Analysts say that the desire of the Private Equity Companies that owned UBN to sell simply matched Titan Bank’s appetite and intention; hence, the deal.
About 90% of Union Bank is owned by pension funds managers (Global Partners Limited and Atlas Mara Limited, among others), so it was just a matter of time before they left. Titan other hand is owned by some Nigerians like Tunde Lemo, former CBN Deputy Governor and some foreign investors. Industry analysts are saying that the deal might have cost Titan close to N200 billion.
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Banking sector watchers further argued that “this is probably the first deal within the banking industry that is arising out of such alignment of objectives rather than out of a need to rescue the target bank.”
Therefore, what GDI and Titan would do with the Union Bank brand remains to be seen.
Union Bank Acquisition
Union Bank acquisition looks like an exciting news to Nigerians, away from the spirit-dampening stories of terrorist attacks, incessant killings and COVID-19 pandemic. The transaction probably depicts an inbuilt dynamism and growing sophistication of the industry and its readiness to overcome challenges. It would appear that the regulatory authorities have provided the necessary bulwark against systemic failure seen in the 1990s.
The takeover of Union Bank is not unusual, as the banking sector has, in the last 20 years, seen a few: Stabdard Trust Bank (STB) took over UBA; Access Bank took over Intercontinental and Diamond, among others.
Recall that the CBN had, under Prof Charles Soludo in 2004/2005, forced the industry to consolidate. It led to many mergers and acquisitions which led to emergence of the first set of 25 strong banks.
The takeover of Union Bank is therefore a clear indication that the weaker ones in the industry will always be targets of acquisitions.
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The first import of this transaction is that Union Bank now has a new set of majority shareholder and so a new management will soon emerge. More capital would be infused into the bank to acquire new technology and rejig its human capital base. But because Titan Bank is such a small lender, It is unlikely to see a holistic replacement of the current management team in Union Bank. The new owners might not also contemplate a rebranding of Union Bank for now as it would be very costly for them.
Second, this deal will not change the structure and market share in the industry and this is very important. Over 75% of the deposit liabilities in the industry is controlled by only five banks: Access, GT, UBA, Zenith and First Bank. They also control the size of the customer base, assets and profitability. Well, First Bank is no longer among the top five profitable, no thanks to their huge write downs over the years! But with the new management in place, the First Bank might comfortably escape being the next target of a takeover.
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Overall, Titan Bank has made a good move. Overnight, its branch network will grow from 10 to over 300 and Profit Before Tax (PBT) from N3 billion to over N30 billion. It is now up to the two-year-old acquirer to steer the stallion on the path of continued growth.
Etim Etim
ETIM ETIM is a journalist, banker and author. He has been a member of the Editorial Board of The Guardian, a Regional Manager in Access Bank and is currently a Columnist in Prime Business Africa, The Cable and Businessday newspapers.
He is also the Chief Executive of Stein Meyer Communications, a major media consultancy and the author of the best-selling book, "Akwa Ibom Heroes: Inside Story of the Fight for Abrogation of Onshore-Offshore Oil Dichotomy" and co-author of another book, "Osinbajo Strides: Defining Moments of an Innovative Leader".
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
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