On July 30, 2011, Oceanic Bank International (“Oceanic” or “the Bank”) signed a Transaction Implementation Agreement (“TIA”), in respect of its re-capitalisation, with Ecobank Transnational Incorporated (“ETI”). This represents an important milestone in Oceanic’s re-capitalisation and both the Board and Management of the Bank are confident that the transaction will be completed before the Central Bank of Nigeria’s (“CBN”) recapitalization deadline of September 30, 2011.

ETI is the parent company of the Ecobank Group, a pan-African banking group with operations in 31 African countries and France, as well as representative offices in South Africa, London, Angola and Dubai. ETI is set to consolidate its market position in Nigeria by merging the operations of Ecobank Nigeria Plc (“Ecobank”) with Oceanic, in a move that is set to transform the Nigerian banking landscape. Post-merger the combined Ecobank/Oceanic entity will rank as Nigeria’s 5th largest bank by total assets and deposits, behind First Bank, Zenith Bank, UBA and Access/Intercontinental (who are set to conclude an M&A transaction following the execution of a TIA).

The re-capitalisation of Nigeria’s intervened banks is driving a fresh round of consolidation in the banking sector which will result in a dramatic re-distribution of market share. We believe the biggest beneficiaries will be Nigeria’s top tier banks, namely First Bank, Zenith Bank, UBA, GT Bank, the post-merger Access/Intercontinental and Ecobank/Oceanic. Meanwhile, Spring Bank, Wema Bank and Equitorial Trust Bank (ETB) intend to opt for regional banking licences in the CBN’s new licensing regime. As such, we now expect the sector to consolidate down to just 18 Nigerian banks holding national or international licences, following the CBN’s September 2011 deadline.

Following the completion of the re-capitalisation exercise, and as Nigerian banks jostle for market share in the sector, we also expect some new entrants into Nigeria’s list of top 10 banks. By Q3-12, we believe that the top 10 banks could be as follows:

1. First Bank
2. Zenith Bank
3. UBA
4. Access/Intercontinental
5. Ecobank/Oceanic
6. GT Bank
7. Union Bank
8. FCMB/Fin Bank
9. Skye Bank
10. Diamond Bank

To date, 4 (four) of the 8 (eight) intervened banks have entered into legally binding TIAs with prospective M&A partners: Intercontinental Bank with Access Bank, Fin Bank with FCMB, Union Bank with African Capital Alliance and most recently Oceanic Bank with ETI. As the CBN continues to support the re-capitalisation of the intervened banks and promote the stability of the banking sector, we expect to see an extension of the CBN interbank guarantee on placements with Oceanic Bank till December 2011, as was given to Intercontinental Bank, Union Bank and Fin Bank, following the announcement of their respective TIAs.

Over the next few weeks we anticipate further M&A announcements from the other intervened banks that are yet to announce deals, namely Afribank, Bank PHB, Spring Bank and ETB.

Source: Chapel Hill Denham Research