Bank mergers the in thing now in TZ

Bank of Tanzania headquarters in Dar es Salaam. The past two years have seen major banks in the country look for partners in a bid to raise new capital, create synergies and build economies of scale to tackle increasing competition. PHOTO | FILE


With mergers and acquisitions the in thing now for Tanzanian banks, the next chapter appears to have begun, and analysts have hinted at a brighter future

Dar es Salaam. Merger and acquisitions have been big news to banking sector in Tanzania over the last two years.

Apart from regulatory measures taken by the Bank of Tanzania (BoT) to merge certain local banks over capital adequacy, the sector has continued to receive more merges and acquisitions announcements, involving both local and foreign banks.

Analysts say the merger and acquisition will automatically change the landscape and improve banking sector in Tanzania, through consolidating assets, deposits and improving capital base.

Tanzania Institute of Bankers executive director Patrick Mususa said merger and acquisition was good to banking because it consolidate businesses, while increasing protection to deposits, which accounts for nearly 80 per cent of the industry’s assets.

“We have observed banks merging with others, once the banks being acquired or merged, it means the customer deposits continue to exist as what is changed is only the name,” he said. In August last year, the sector witnessed the merge of Twiga Bancorp, Tanzania Women’s Bank (TWB) to TPB Bank Plc, after the two former banks failed to meet the capital adequacy as required by the regulator.

The merge involved all assets, workers debts of TWB and Twiga, which were both owned by the government, through the Treasury registrar, being transferred to TPB Bank Plc, the oldest institution in Tanzania’s financial and banking sector.

Twiga and TWB were put under statutory management of the Bank of Tanzania since 2016, following their undercapitalization status.

BOT noted when announcing the measure that has taken to improve the oversight and performance of banks owned by the Government.

Commenting on the move, TPB Bank managing director Sabasaba Moshingi said merger and acquisition is a good thing because it is building solid financial institutions.

He said the merge of banks is expected to create strong capital and liquidity base, which will help to cushion risks facing the banking industry.

“Merger and acquisition is good for the economy; is good for liquidity; is good for regulator and good for customers as well,” he told The Citizen Monday.

He said merge and acquisition is not only experienced in Tanzania but other countries including in Nigeria, where recently; the central bank increased capital requirements, which resulted into merger of some banks.

On January 15 this year, the BoT announced the authorization of merger between Azania Bank and Bank M Limited, which was under statutory management of BOT since August last year.

The merger resulted into making Azania as top mortgage lender in Tanzania with 22 per cent of the market share and a loan portfolio of Sh78 billion.

Prior to merger, Azania had only 8 per cent of the mortgage finance market share with the portfolio of Sh59 billion.

After the deal was concluded, Azania shareholders, who are social security funds, injected an additional capital of Sh120 billion to boost liquidity.

Two months later, Exim Tanzania announced that it was planning to acquire all assets of UBL Tanzania Limited.

Exim Bank and UBL Bank said in their joint statement over the acquisition in March this year that an offer of intent for the deal, was already made, although the value of the deal were yet to be determined.

The planned acquisition was subject to regulatory approval in both Tanzania and Pakistan and was expected to complete by the half of this year. Both were also working with BoT to smooth the transaction.

UBL originated from Pakistan, opened its first African branch in Dar es Salaam on September 4, 2013. Internationally, UBL has more than 1,220 branches, as well as 17 branches in the United States and throughout the Arab Peninsula.

The deal will enable Exim Bank to have the combined assets of Sh1.7 trillion from currently Sh1.6 trillion.

At the end of April this year, the Kenyan largest bank- Equity Group announced that it has entered into an agreement with Pan-Africa focused banking group Atlas Mara to acquire the latter’s banking operations in four African countries including Tanzania.

Atlas Mara is the majority shareholders of BancABC Tanzania, which is also owned by the government of Tanzania.

The transaction, which will be done through a share swap, will see Equity Bank acquire 62 per cent of share of Banque Populaire du Rwanda Limited, 100 per cent of African Banking Corporation (ABC) stake in Zambia, Tanzania and Mozambique.

Equity Bank Kenya announced that it expects to allot about 252.5 million new ordinary shares that represent about 6.27 per cent of Equity’s issued shares equivalent to Ksh10.7 Billion (Sh240 billion).

On Kenya side, the Competition Authority of Kenya (CAK) has approved the proposed merger in May 13, but in Tanzania, it was waiting the approval from the regulators, which are BoT and fair Competition Commission (FCC).

“Based on the foregoing, the Authority’s view is that the proposed transaction is unlikely to lead to lessening of competition in the relevant product market for retail and corporate banking services in Kenya,” CAK said in a statement as reported by Kenyan Business Daily.

CBA and NIC said there was a possibility of branch closures where overlaps exist.

The merge will enable the merged banks to have a combined asset of more than Sh500 billion in Tanzania.

The banks group in Kenya said none of the 1,872 employees of Commercial Bank of Africa and NIC Bank should be declared redundant for a period of 12 months from the date of closing of the transaction.

On April 15, the local banking sector also received acquisition news after Hakika Microfinance Limited announced to take over Mwanga Community Bank, based in Mwanga, Kilimanjaro region.

The FCC announced it was carrying out investigations over the deal and it is yet known whether the deals was already been approved.

The Hakika Microfinance Bank Limited (HK MFB) is a private limited liability company (by shares) which was established by the Arusha Club SACCOS and the Individual Tanzanian entrepreneurs.

The bank was established to availing banking services and products to the under banked community particularly those in the low and middle-income segment of the society within Arusha and surrounding regions of Manyara, Kilimanjaro and beyond.

The target firm is a licensed community bank providing banking services in the Kilimanjaro region.

The acquiring firm is set to take over the entire operation of Mwanga Community Bank and in post-merger scenario, the separate existence of target firm will cease and new company will be created under the name of Mwanga Hakika Bank Limited.