Nigerian bank eyes oil deals after Fina acquisition
Fina Bank Group director Hanish Chandaria said Guaranty Trust was looking for a bank that has experience and presence in EA markets. Photo/Diana Ngila
What you need to know:
Guaranty Trust Bank last week announced it had acquired a 70 per cent stake in Fina Bank for $100 million (Sh8.6 billion).
The bank's growth has been fuelled by the West Africa’s oil and gas industry, and the Nigerian lender is seeking to replicate the same strategy in the region to drive its expansion.
Guaranty Trust Bank had $10.76 billion or two-fifths of the Kenyan industry’s combined balance sheet at the end of December.
Nigeria’s Guaranty Trust Bank will lean on its acquisition of Fina Bank to tap the emerging lending opportunities in East Africa’s oil and minerals sector, a director of the Kenyan lender has said.
Guaranty Trust Bank last week announced it had acquired a 70 per cent stake in Fina Bank for $100 million (Sh8.6 billion).
In an interview with the Business Daily, Fina Group director Hanish Chandaria said Guaranty Bank is eyeing the lucrative lending opportunities presented by the recent discoveries of oil and gas, coal and other minerals in Kenya, Tanzania, Uganda and the wider Eastern African region.
Guaranty Bank’s growth has been fuelled by the West Africa’s oil and gas industry, and the Nigerian lender is seeking to replicate the same strategy in the region to drive its expansion.
“That is why Kenya and Uganda are very important for them,” said Mr Chandaria. Fina Bank has a presence in Kenya, Uganda and Rwanda; three countries with natural resources that are at different stages of exploitation.
Guaranty Trust was looking for a bank that has experience and presence in these markets which made Fina Bank a strategic fit, said Mr Chandaria.
Oil and gas exploration and drilling is a capital intensive undertaking and industry experts have said that foreign banks are better positioned to exploit the emerging opportunities than Kenyan lenders since the amounts involved are beyond most local banks’ balance sheets.
“Most banks don’t have the capacity to play in this league,” UBA Bank Kenya’s chief executive Tunji Adeniyi, told participants at an oil and gas conference held in Nairobi in February.
The Banking Supervision Annual Report 2012 shows that Kenya’s 44 commercial banks and eight deposit-taking microfinance institutions had Sh2.33 trillion ($27 billion) in net assets as at the end of last year.
By comparison, Guaranty Trust Bank had $10.76 billion (Sh937 billion) or two-fifths of the Kenyan industry’s combined balance sheet at the end of December.
The same discrepancy in funding ability between international and indigenous firms is mirrored in the energy sector.
Delonex Energy, an oil prospecting firm that opened its regional headquarters in Nairobi last month, is raising Sh52 billion for natural gas and petroleum prospecting in the region, two and a half times bigger than KenGen’s Sh20.3 billion public infrastructure bond offer about two years ago.
Mr Chandaria said that Guaranty Trust Bank already has experience in handling complex and huge transactions, the latest being a $3 billion loan the bank secured for MTN Nigeria.
Guaranty Trust Bank is also listed on the London Stock Exchange, which affords it the ability to access a wider pool of funds at a cheaper rate and in a variety of currencies.
Fina Bank, which mainly specialises in corporate finance of mid-sized businesses, will also leverage on Guaranty Bank’s wider pool of funds and reach on the continent. The Nigerian bank is present in seven countries.
Rebranding and diversifying into retail banking are also on the table, tapping Guaranty Trust Bank’s experience in the markets it operates.
“We have not yet decided but at some point we will want to be part of a larger franchise,” said Mr Chandaria.
The deal should be concluded in the next two to three months subject to regulatory approvals. Negotiations for the deal began 18 months ago.
On conclusion; board seats, save for the independent ones, will be split between Guaranty Trust Bank and Fina Bank on a seven-to-three ratio, reflecting the new ownership structure.
Guaranty Trust Bank’s acquisition values Fina Bank at Sh12.4 billion. There will also be a capital injection of between Sh2.6 billion and Sh3.49 billion.
Similar deals are expected to materialise as the Nigerian economy grows, which is expected to result in their financial institutions getting more money to fund acquisitions, according to Mr Chandaria.
Fina Bank and the International Finance Corporation recently signed a Sh434 million trade finance guarantee to back foreign transactions by the bank’s customers.
The deal is expected to make suppliers and buyers in foreign markets more comfortable dealing with Fina Bank customers, with the IFC as a guarantor.
