Equatorial and Southern Credit merger gets nod
Posted Wednesday, June 2 2010 at 00:00
The merger between Equatorial Commercial Bank (ECB) and Southern Credit Banking Corporation (SCBC) has finally been given shareholder and regulator approval and will take effect from Thursday under the name ECB.
Industry players said the merger has been carried out in time to beat the 2012 Central Bank of Kenya deadline which demands that commercial banks shore up their core capital to at least Sh1 billion, as well as synergising their resources to increase their joint efficiency.
The merger has been viewed as a conveniently executed move that would serve shareholders of both companies who, according to one analyst, have common interests that the merger would address, adding that the banks would hardly change their approach to business.
“ECB and SCBC are coming together to gain from the convenience of the consolidated businesses and the access to more branches for their respective customers,” said Alex Muiruri, an analyst with Faida Investment Bank.
He said that the product line of the banks would remain the same because none of them has made any serious attempts to develop retail banking, but would rather remain focused on the niche market they have served before.
“Retail banking would be an expensive avenue that none of the two banks would like to explore. Whereas the big banks could be aiming to increase their customer base, ECB will stick to the business models that both banks have had,” said Mr Muiruri.
Peter Harris, who has been the CEO of the original ECB and who will head the new business entity, said earlier in a statement that the banks were seeking to integrate their operations so as to share costs relating to management and delivery of services to achieve increased efficiency.
“We plan to broaden the services we offer to customers quickly through integrating the offerings of both banks, and we believe we can compete and grow much more effectively with the critical mass that this merger delivers,” said Mr Harris.
Analysts expect that the merged banks will also work around their individual products and find a means to compare and develop on the better one between comparable products.
“SCBC’s customers are likely to be transferred on to the ECB’s platform so that the merged bank can do away with products that are a replica of another product,” said Wycliffe Masinde, the head of research at Kestrel Capital, adding that it would make business sense for banks seeking to grow to do so through mergers and acquisitions.
A merger would be the best option for these banks, he said, because much as both may be targeting niche markets, their target market is clearly different if one considers the branch distribution of either of them.
The merger will offer additional resources since the combined total assets will add to over Sh8 billion, and this will lift the profile of the respective banks that have been ranked 32nd and 35th out of the 44 operating in Kenya.
The move would essentially take the new ECB to number 25th, according to figures put together by the Banking Survey.
ECB will beginning June 1 have a total of 12 branches that are located around the country, compared to the original three that it had; two branches in Nairobi and one in Mombasa.