The banks involved are about three of the eight indigenous lenders that are currently struggling to meet regulatory requirements on capital.

Although both sides are strictly complying with non-disclosure agreements, the GRAPHIC BUSINESS understands talks have already advanced and two separate deals could be announced between August and December this year.

One of the initiators and prospective buyers is the CDH Group, which is closing in on a merger deal that will see either the holding company or CDH Savings and Loans Company acquire or merge with one of the indigenous banks.

Another is Groupe Ideal, which is hopeful that ongoing negotiations will conclude successfully for merger processes to commence between its First Trust Savings and Loans Company and a suitor bank to be able to start full banking operations.        

Bigger is better

The Chief Executive Officer (CEO) of the CDH Group, Mr Emmanuel Adu-Sarkodee, told the GRAPHIC BUSINESS in Accra that merger talks have been smooth and are now at a concluding stage, with an announcement expected in August.

The announcement should bring to an end series of “marriage proposals” that the CDH Group initiated with three banks last year but narrowed them down to the current suitor due to a mix of operational and philosophical similarities between the new partner and the group.

“The usual thing for everybody is to just build up capital and apply for a banking licence, but we think that is not the way to go.

“We think it is rather better to merge with an existing bank there and build a bigger bank,” Mr Adu-Sarkodee said, pointing to Ecobank Ghana’s takeover of The Trust Bank (TTB) in 2011.

The GH¢220 million deal catapulted Ecobank to the top spot in the banking sector, with total assets in excess of GH¢2.2 billion, equity of $225 million and 70 branches immediately after its consummation.

“If you look at what they have been able to do by merging with TTB, then you can tell that that is the way to go and we like that model,” he added.

Successful mergers will also help under-capitalised banks to meet Bank of Ghana’s new capital requirement, which is expected to be revised to about  GH¢300 million, from the current GH¢120 million.

A banking consultant, Nana Otuo Acheampong, said bank consolidation would be timely and an icing on the current growth aspirations of the country. 

“With the amount of funds coming from China, we need big banks to be able to use them for leveraging,” he said, referring to the proposed $20 billion package that the government is seeking to secure from the Chinese government and investors.

However, he said moral suasion, not compulsion, should be used to achieve that goal.

Grounds for mergers

Discussions on the need for bank consolidations have been ongoing for sometime now, although not many successes have been achieved.

With a population of about 27 million people and an annual gross domestic product (GDP) of close to $40 billion, Ghana’s economy is understandably small for the current 35 banks.

The situation even becomes more interesting when Ghana is weighed against Nigeria and South Africa, whose economies are estimated to be worth $550 billion and $400 billion respectively.

Unlike here, 25 and 20 banks serve some 56 million and 190 million people in Nigeria and South Africa respectively, making Ghana’s bank numbers a curious spectacle for the likes of CDH Group’s CEO.

“We believe that when it comes to financial services, big is good. People say we can syndicate, but syndication is expensive; if my base rate is 16 per cent and yours is 18 per cent and we are syndicating, then my appetite for risk and single obligor will be different.

“Then it makes the whole thing very cumbersome. It can be done, yes, but I think it is better when it is big and that is why we think mergers and acquisitions should be the option,” he said.