Header Ads

Access Bank's Acquisition Of Diamond Bank - What Happens To Diamond Bank Customers? Must Read


The news of Access Bank’s acquisition of Diamond Bank which hit the air last weekend has continued to reverberate across the country and undoubtedly, the primary concern for many Nigerians will be what happens to their deposits in Diamond bank. To be honest, some customers besieged Diamond bank on Monday for panic withdrawals. But no need for that.

Though echoes of banking failures in the past have left many Nigerians wary of news concerning a merger or acquisition. Fortunately, this is not a bank failure but a merger between a Tier 1 (Access Bank) and a Tier 2 (Diamond Bank) bank respectively.

Now, this is what happens to Diamond Bank depositors? 

Depositors with Diamond Bank must be wondering, what happens to my deposits with Diamond Bank. This is a pertinent question since it appears Access Bank is the stronger of the two banks and Diamond Bank appears to be the bank in need of capital. Results for the nine months ended September 30, 2018, show the bank had N1 trillion in deposits from customers. These comprised N383 billion in demand deposits, N452 billion in savings deposits and N231 billion in term deposits.

Since Access Bank is the dominant entity, Diamond Bank customers would be absorbed into the Access Bank fold and issued new account numbers. This could take weeks to happen but before then, we expect regular banking activities to continue without many hitches.

Deposits with Diamond Bank are and will remain safe, as the bank is in no form of financial distress. The Central Bank of Nigeria (CBN) would also be on hand to provide any required support should there be panic withdrawals. The apex bank would most likely issue a statement, before the close of business today,  of some sort assuring customers of the safety of their deposits.

CBN’s take on bank takeovers

The CBN had this year when it announced the revocation of Skye Bank’s operating licence, maintained that all deposits would be secure. In their words;

“WE WISH TO ASSURE ALL DEPOSITORS THAT UNDER THIS ARRANGEMENT, THEIR DEPOSITS SHALL REMAIN SAFE.”

The proposed merger between Access Bank and Diamond Bank is however different as it does not require any capital injection from the CBN. Thus, even in extreme cases where the CBN has had to inject capital or take over banks, depositors funds have always been safe. We, therefore, do not see any difference in this situation as depositors funds will be safe.

Is there any need to close my Diamond Bank account

Except you are not comfortable being a customer to Access Bank, there is absolutely no need to close your account with Diamond Bank. This does not mean caution should be thrown out of the window but we strongly believe that the outcome of the merger will produce a stronger bank in terms of customer deposits.

Diamond Bank is known for its tech-driven solution banking so it is also likely that Access Bank will acquire some of these technological assets and incorporate it into its banking services.

For several other Diamond Bank accounts, particularly premium banking services, it may not be wise to retain such accounts particularly if they attract high  (which Access Bank have reputation on) in exchange for unique services. The services may not be as excellent considering the pressure of the merger and may not be worth it. Such accounts may be moved to a regular account to avoid undue charges.

Access Bank however, has formally announced the signing of a Memorandum of Agreement (MoA) with Diamond Bank regarding a potential merger of the two banks. The new merger is expected to form Nigeria’s and indeed Africa’s largest retail bank by customer size.

According to Access Bank, its choice as a referred bidder came after a competitive selection process undertaken by the Board of Diamond Bank Plc.

Details of the MoA

The proposed merger would involve Access Bank acquiring the entire issues share capital of Diamond Bank in exchange for a combination of cash and shares in Access Bank via a Scheme of Merger. Based on this agreement by the boards of the two financial institution, Diamond Bank shareholders will receive N3.13 per share.

This will comprise a cash consideration of N1.00 per Diamond Bank share representing a total cash amount of N23.16 billion or $75.58 million. The allotment of 6.62 billion new Access Bank ordinary shares, representing the 2 new Access Bank ordinary shares for every 7 Diamond Bank shares. The offer represents a premium of 260% to the closing market price of N0.87 per share of Diamond Bank on the Nigerian Stock Exchange as of December 13, 2018.

However, the completion of the transaction would be subject to formal regulatory and shareholder approvals.

Diamond Bank CEO, Uzoma Dozie's reaction;

“THERE IS CLEAR STRATEGIC RATIONALE FOR THE PROPOSED MERGER AND STRONG COMPLEMENTARITIES BETWEEN THE TWO INSTITUTIONS. WHILE DIAMOND BANK HAS PIONEERED NIGERIA’S LARGEST TECHNOLOGY-LED RETAIL BANKING PLATFORM, ACCESS BANK IS ONE OF NIGERIA’S LEADING FULL SERVICE COMMERCIAL BANK. CONSOLIDATION IN THE NIGERIAN BANKING INDUSTRY IS AN INEVITABLE, NATURAL PROGRESSION IN A SECTOR WHERE THE GAP BETWEEN TIER 1 AND TIER 2 BANKS HAS BEEN WIDENING AND SCALE HAS BECOME CRITICAL WHERE TECHNOLOGY WILL DISRUPT THE TRADITIONAL BUSINESS MODEL  WHILE ENABLING BROADER FINANCIAL INSTITUTION”

Also Commenting on the new MoA, Herbert Wigwe, CEO of Access Bank, noted;

“ACCESS BANK AND DIAMOND HAVE COMPLEMENTARY OPERATIONS AND SIMILAR VALUES AND A MERGER WITH DIAMOND WITH ITS LEADERSHIP IN DIGITAL AND MOBILE-LED RETAIL BANKING COULD ACCELERATE OUR STRATEGY AS A SIGNIFICANT CORPORATE AND RETAIL BANK IN NIGERIA AND A PAN-AFRICAN FINANCIAL SERVICES CHAMPION. ACCESS BANK HAS A STRONG FINANCIAL PROFILE WITH ATTRACTIVE RETURNS AND A ROBUST CAPITAL POSITION WITH 20.1 CAR AS AT 30 SEPTEMBER 2018.”

Its also worthy to note: Diamond Bank was incorporated on December 20, 1990 and began operation as a private limited liability company on March 21, 1991. Access Bank was listed on the Nigerian Stock Exchange in 1998 with its Bond instrument listed on the Irish Stock Exchange in 2016.

No comments

Rebecca More. Powered by Blogger.