Zenith Bank Plc has reportedly been given the green light to merge or acquire Union Bank Nigeria Plc. Nairametrics got wind of this from a reliable source. We understand talks are currently ongoing between the banks and a tentative arrangement may have been reached to commence due diligence.
Zenith Bank is Nigeria’s largest bank by profits and second by total assets and could increase its size significantly further with a potential acquisition or merger of this magnitude.
Why the merger: It is not immediately clear why both banks will be considering a merger, however, Union Bank owners Atlas Mara with a 49% stake has been under pressure to exit their African holdings.
Last year (February), Atlas Mara co-founder Bob Diamond announced he was resigning his post as Chairman of the company. The company said it was looking at selling off banking assets in countries where it was not the dominant player.
Why Zenith: We believe for Zenith Bank a potential merger could be for two main reasons. Firstly, a merger firmly solidifies Zenith Bank’s position as the largest bank by total assets after falling second to Access Bank with N7.1 trillion. It also gives Zenith Bank control over several juicy assets and right of ways owned by Union Bank from its legacy years.
It could also have been instigated by the CBN. which cannot phantom another nationalization of a bank the size of Union Bank. Sources inform Nairametrics that the apex bank is favourably disposed to this move.
Result sheet: Union Bank Results; In a notification that was sent to the Nigerian Stock Exchange (NSE), the banking group recorded a 10.3% growth in profit. The profit before tax as of December 31, 2019, was N20.35 billion as against the N18.45 billion that was achieved for the corresponding period for 2018.
Zenith Bank, on the other hand, reported a record profit after tax N208 billion out of a gross earning of N662 billion. Zenith Bank’s net assets of N941.8 billion dwarfs Union Bank’s net assets of N252 billion as of 2019.
Union Bank share price closed at N6 with a market cap of N174 billion as on Friday, March 13th. Zenith Bank closed at N11.90 or N373 billion and trading at a price to earnings multiple of 1.79 compared to Union Bank’s 7.28x.