New technologies are the accelerator in the transformation of the banking industry. Those stakeholders able to grab the opportunities provided by new technologies and by new regulations will be able to take advantage over their competitors. These companies, will be positioned to accelerate their growth by launching smart partnerships or consider growing through acquiring other market players.
Acquisitions and merging are crucial strategic decision in context of market consolidation
In this context, companies must put a premium on performing the most accurate and transparent due diligence of their potential acquisition. These due diligences have to take into consideration multiple factors specific to the assessed company but more generally, related to the context and the potential synergies with the acquiring group.
Case of Nigeria: 10-fold increase of minimum capital for banks accelerated market consolidation
The country introduced banking reforms in 2005 including a more than tenfold increase in the minimum capital requirement for banks from NGN 2 billion to NGN 25 billion (approximately USD 190 million). Compliance with this new rule was mainly achieved through mergers and acquisitions. The resulting consolidated banks were found to be significantly more efficient and slightly more profitable, with lower levels of NPLs (Cook, 2011).
AdVision Finance support actors involved in finance in developing markets in the development of their general strategy, definition of their business model and key strategic decision making.
As a result of banking reforms and technological changes, the banking environment has progressively become more competitive. Sub-Sahara Africa is the developing region of the world with the largest proportion of foreign-owned banks (Claessens and van Horen, 2012). Low-scale and weak competition in many Sub-Sahara African markets has opened the way for SSA banks to operate across borders and compete with local banks. The emergence of these regional African banks with a clear pan-African ambition has modified the banking landscape and fostered competition and innovation.
Letshego group is an African financial group originally created in Botswana 21 years ago to provide loans to government employees. Today the group has over 3000 employees and operates in 11 sub-saharian countries.
AdVision was part of the internal due diligence team at Letshego Holdings Ltd. in respect of the proposed purchase of a regulated bank in Nigeria. The project included an initial review and analysis of all products, application forms, portfolio breakdown as well as detailed financial analysis. The onsite assessment included meetings with the Letshego team, including one to one meetings with the Managing Director, Head of Business Development, Head of Credit Analysis, Head of Operations, Head of Electronic Business and Audit Team.
Recommendations were drafted and reported to the Executive Team at Letshego Holdings Ltd. They included details of the current performance and efficiency ratio’s as well as recommendations for improvement after a potential purchase.
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