United Bank for Africa intensifies its acquisitions effort under the Purchase and Assumption Arrangement with the cherry-picking of failed Liberty Bank, leaving Fortune and Triumph for acquisition
By Clement Oriloye
Eleven up, one in the final stage of merging with a leading Nigerian bank and only two more to cherry pick. That was the cherry position by last week as United Bank for Africa Plc in another bold move acquired Liberty bank, one of the 14 banks that failed to meet the recapitalisation deadline about 18 months ago. And what a relief for the depositors of Liberty bank.
UBA won the bid to acquire the bank under the Purchase and Assumption transaction arrangement of the Central Bank of Nigeria CBN and the Nigeria Deposit Insurance Corporation, NDIC. This brings to six the number of banks so acquired by Africa’s global bank, UBA. The bank had earlier acquired five failed banks – City Express Bank, Gulf Bank, Trade Bank, African Express (Afex Bank) and Metropolitan Bank.
Under the Purchase and Assumption model, UBA has thies acquired the physical assets and Private Sector liabilities (depositors) including the 17 branches of the acquired bank. This has brought to over 700 the number of branches of the financial giant. According to Victor Osadolor, Executive Director/Group Financial Officer, UBA Plc, this acquisition inches the bank closer towards the actualisation of the bank’s vision of leading the financial service sector across the continent. A statement issued by UBA noted that though the acquisition of banks under the Purchase and Assumption scheme is a commercial decision, it also serves as the banks’ contribution towards bringing relief to the depositors of the banks in liquidation after playing the waiting game. Cherry-picking, otherwise known as Purchase and Assumption model, is an arrangement in which a healthy bank acquires some or all the assets of a failed bank and assumes some or all the liabilities, including all insured deposits.The 14 failed banks are All-States Trust, Hallmark, Assurance, Trade, Lead, City Express, African Express, Gulf and Liberty. Others are Metropolitan, Societe-Generale Bank of Nigeria, SGBN, Eagle, Fortune and Triumph. While others have been acquired by some healthy banks, Societe-Generale which secured court order in April to recapitalise is believed to be in the final stages of merger arrangement with Intercontinental Bank, leaving Fortune and Triumph banks to be cherry-picked. With depositors in the failed banks wearing long faces over their trapped funds, the regulatory body has been busy matching action with its initial words to provide relief for any depositor caught in the recapitalisation crossfire. The Purchase and Assumption model has been very useful in the entire process of acquisition by healthy banks.
Interestingly, the Purchase and Assumption transactions do not involve immediate payment of physical cash to depositors, but serve as a resuscitation of dead account which helps to boost the deposit base. To ensure that effective seriousness, UBA has ensured that effective 23 June this year, it will commence the verification and assumption of all the private sector deposits of Liberty Bank’s depositors as at the date of closure of business in Liberty bank. In 2006, Eco Bank Nigeria Plc blazed the trial with its acquisition of All States Trust Bank. The bank would also later acquire Hallmark Bank last year.
While Afribank Nigeria Plc acquired Assurance and Lead banks, Zenith bank acquired Eagle bank. The cherry-picking would have been concluded not more than a year after the recapitalisation deadline of 31 December 2005, but for some of the promoters of the failed banks who instituted legal action against the CBN, challenging the revocation of their licences.
Comment