Intercontinental Group Projects Better Returns
By Uche Obike
There are indications that the Intercontinental Gro-up comprising Inter-continental bank Plc, Equity Bank, Gateway Bank, Global Bank has a better prospect of making greater returns to shareholders.
Investment analysts belie-ved that the coming together of these banks was the best thing that could happen to the investors who desire better returns on their investment in such a consolidated group.
Recently, the Interconti-nental Bank Group made up of Intercontinental Bank, Equity Bank, Gateway Bank and Global Bank signed a Memo-randum of Understanding (MoU) to kick-start the merger process.
The ceremony was a major success as the Chairmen and Chief Executive Officers of the four members of the group signed the necessary documents to officially commence the process of coming together as one corporate entity in the next few months.
This process of consolidation was a response to the Central Bank of Nigeria's (CBN's) recent directive that all banks operating in Nigeria should shore up their capital base to N25 billion by December 31, 2005.
Left for Intercontinental Bank Plc it could have gone it all alone because it has what it takes to do so.
Currently, the bank is placed seventh in the industry ranking in terms of capital base with N10.2 billion, a figure which places it high above its peers.
Intercontinental Bank also has the market goodwill and could leverage on this to meet and even surpass the requirement. Equally, the share price of the bank has started appreciating again. With the expected rally in the next few weeks, market operators believed that the price could move up to N8.00 per share. That, to a large extent, underscores the confidence investors have in the bank.
This confidence was again demonstrated recently when the bank benefited immensely from the panic withdrawals from banks considered weak in the light of CBN's pronouncement on capitalisation last July.
With this pedigree, it may be surprising to industry followers why Intercontinental Bank is going into the merger arrangement.
Meanwhile, Global Credit Rating Co (GCR), world's leading rating agency based in South Africa recently raised its rating of Intercontinental Bank Plc to "AA" following impressive rise in the bank's financial profile in the audited accounts as at 2003.
Some of the performance indicators that informed the double A rating according to the agency include the balance sheet size and quality in terms of capital base and assets, a position significantly strengthened after the additional equity capital raised through the Initial Public Offer (IPO, in 2002.
The bank's group financial strength is set for a fresh boost with the consolidation of its group members which include Equity Bank, Gateway Bank and Global Bank bringing its total capital and assets to N16.6 billion and N152 billion respectively.
The agency noted that the double A rating was as a result of the bank's highly liquid balance sheet where deposits are 75 per cent covered by liquid assets, which serves to underpin its high short-term rating.
It pointed out that it took cognizance of the positive trend in the quality of the bank's assets in 2003 with the gross Non-Performing Loans ratio declining to 5.7 per cent.
According to the GCR rating, Intercontinental Bank despite the decline in net interest margin and concomitant rise in operational costs would remain profitable, with key profitability ratios above industry averages.
However, THISDAY checks revealed that two factors are responsible for the merger decision. The has a good knowledge of how to make group structure. Intercontinental Bank has indeed operated a group structure for over 10 years dating back to 1993 when it acquired controlling shares in Associated Discount House Limited (ADHL).
Also, in 1996, it acquired an ailing Equity Meridien Merchant Bank and turned around to today's profit venture called Equity Bank.
Similarly, four years later in 2000, intercontinental Bank acquired through ADHL, controlling shares in Gateway Bank and same story is told of WAPIC Insurance in which the bank holds majority shares and has so far improved the fortunes of the insurance firm in the country.
Today these two institutions are not only stronger but also part of the thriving group structure that Intercontinental has operated in the last eight years. Other members of the Group include, Intercontinen-tal Securities and Intercontin-ental Capital markets Limited, both leading players in the capital market.
Indeed, this skills of acquiring and turning around ailing financial institutions to profitable concerns and diversifying into other areas in the financial services industry have clearly positioned the bank as a financial supermarket and operator of one of the largest banking groups in the country.
Analysts also believed that in the wake of CBN's compulsory merger and consolidation in the banking industry, its is only natural that the group consolidate into one single management and corporate entity.
The bank's Vice Chairman and Chief Executive, Dr. Erastus Akingbola, stressed on the need to shift from the minimum figure to something much bigger.
Akingbola said that it was not only imperative for the survival of its subsidiaries in the current dispensation but also strategic for the consolidation of the group in order to hit the targeted competitive capital size of N40 billion which will place the bank among the top four banks in the industry.
He added that the part of the gains of this merger would deliver to the bank group or shareholders would be to achieve a premier position in the banking industry.
It is also believed that with a strong board of directors made up of visionary and resourceful businessmen who have been together in the last 15 years, make Intercontinental Bank is a brand name to cherish.
The ever-proactive board remains the bedrock of the bank's steady rise to the top.
The strength of the board lies mainly in its composition and unity of purpose. The board is composed of an array of men that would be difficult to assemble in today's banks. The Intercontinental Bank board can be described as a rare collection of distinguished achievers of our time.
From their intimidating educational background and varied management experiences to business acumen, the board is simply the quintessence of what the board of any forward-looking bank should look like.
The array of distinguished personalities on the board include the indefatigable boardroom guru, seasoned banker and administrator, Dr. Raymond Obieri, and of course, Dr. Erastus Akingbola, a consummate banker with capacious intellect and savvy, whom together have over 67 years experience in banking.
This stability is also replicated in the boards of the other three banks that make up the new group. Incidentally, most of the directors have vested interests in one or all of the banks that are consolidating into one entity.
In terms of financial performance, the group as at December 2003, recorded gross earnings that stood at N33.3 billion, with total asset of N152.0 billion, while profit before tax stood at N6.4 billion, with total deposit at N103.8 billion.
With the consolidation, the group's shareholders' funds as at the first half of 2004, is estimated at about N20 billion making it the third largest in the Nigerian banking industry.
The group is considering that the capitalisation of profit of the members would hit over N8 billion with post-consolidation Initial Public Offer (IPO) as part of measures to push its capital base above the N40 billion mark ahead the 2005 deadline.
|
