PERSPECTIVE – The acquisition of Union Bank

The news of the acquisition of of the 102-year-old Union Bank by a two-year-old Titan Bank has gripped national attention as 2021 draws to a close. It seems to be the exciting news Nigerians were waiting for to uplift their spirit above the dampening stories of terrorist attacks, incessant killings and COVID-19 pandemic. This transaction shows the inbuilt dynamism and growing sophistication of our banking industry and its readiness to overcome its challenges. I commend the regulatory authorities for providing the necessary bulwark against systemic failures which we saw in the 1990s.
This takeover is not unusual. In the last 20 years, we have seen a few: STB took over UBA and Access Bank took over Intercontinental and Diamond, among the lot. We should also 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. 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. At a time, Access Bank had made a move for it, but changed its mind.
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 over N200b
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, I do not foresee a wholesale replacement of the current management team in Union. In fact, I do not even think that Titan is contemplating a rebranding of Union. That would be very costly for the new owners.
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! In fact, it may be the next target of a takeover, if it does not put its house in order.
Overall, Titan Bank has made a good move. Overnight, its branch network will grow from 10 to over 300 and PBT from N3 billion to over N30 billion. It is now up to them to steer the stallion on the path of continued growth, going forward.

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