Ecobank’s Fruitless Search For A Partner And The Challenge of Confidence - 2008-06-09

Afer suffering three unsuccessful merger attempts with three Nigerian banks, Ecobank’s corporate image and brand equity seems to be heading to the dust, writes Goddie Ofose.

Prior to IBTC Stanbic Bank merger late last year, Ecobank Transnational Incorporated (ETI) was the first bank to enter into a post consolidation merger talk with First Bank of Nigeria. The development, according to industry analysts, was a step in the right direction not only for the financial service market but also for other industries that rely on banks to thrive.

However, the much expected combination between the Nigerian biggest financial institution, FirstBank and West African strongest financial brand, ETI, hit the brick and consumers were made to reap the attendant benefits that went with the merger deadlock.

Merging from the disappointment that came with the non-agreement of the two parties, the Chairman of ETI, Mr. Mande Sidibe at the bank's AGM in Contonou, Benin Republic last year said, “in the agreement between the two banks (ETI and First Bank) expired before we concluded it. Both banks discussed and decided to forget the merger.  We are discussing with other banks and the latest developments will be reported to shareholders in due course.”

It could be recalled since the botched merger arrangement between Ecobank Transnational Incorporated, the parent company of Ecobank Nigeria Plc and First Bank of Nigeria Plc, the former had not made its intention known on where the brand would berth regarding synergizing the business.

It would be noted that the first market induced merger after the first phase of the consolidation programme was the IBTC/Stanbic Bank merger. Today, Stanbic IBTC Bank brand has been officially launched reducing the number of banks operating to 24.

Ecobank Nigeria Plc, a subsidiary of ETI experiencing the trend in the Nigerian market moved to synergize its business model by seeking combination with other players. Firstly, it looked as if another major merger was in the offing when Ecobank Nigeria and Unity Bank converged at the premises of Future View Securities in Victoria Island to sign a Memorandum of Understanding (MoU) to come together to become one entity.

Shortly after the arrangement, the two parties (Ecobank and Unity Bank) parted ways over some irreconcilable issues. The two banks never said what actually happen to a well celebrated merger arrangement. However, M2 investigations reveal that Ecobank Nigeria requested for a position which Unity Bank saw as unfair. While Ecobank is blessed with personnel of the personalities in banking, Unity Bank boosts of trophy investors, who necessarily would not go into merger for financial reason.

When that broke down, Ecobank announced that it was not resting on its oars but in search of a true partner that would take their business objective to the next level in the Nigerian market.

Just recently, another celebrated merger arrangement between Ecobank and Sterling Bank suffered a terrible set back when the banks announced a discontinuation of their planned merger talk, however it did not foreclose re-opening of talks in future, on business combination agenda.

The failure of the merger discussion is also largely attributed to departure of Mr. Babatunde Dabiri as the CEO of the Sterling Bank. While the arrival of Mr. Yemi Adeola, younger brother to Fola Adeola, pioneer MD of GTBank did not support the merger, it has been cancelled a source closed to Sterling Bank told M2.

To experts, this is one excuse of failure too many. Speaking with M2, Mr. Georgi Umunna, Vice President, Hot Shoppe, said the development in Ecobank has caused erosion of confidence level because when America say 'trust bank' that goes to say that a bank with suspicious bank is on the brink of loosing consumers' confidence and suffer decline in brand equity.

He said, after three unsuccessful mergers attempts, the brand equity of the bank is diluted because consumers and indeed Nigerians see them as an organization that does not know what it is doing. Before a bank moves to sign an MoU with another bank, it must have conducted due diligence and from there it knows its position in the plan business combination.”

When M2 requested to know why Ecobank merger with Unity Bank did not work out, Mr. Umunna said Ecobank’s position in the supposed new business could have caused a discontinuation because in Unity Bank, they are very powerful northerners that necessarily do not go into it (merger) to make money, unlike Ecobank whose backers are banking personalities such as Arnold Ekpe.”

Nonetheless, Akonte Ekine, Managing Consultant, FCBRedline, sees it as an internal issue, which the bank has failed to address appropriately.

“Three times failure to get it right say a lot about a bank and the message from the bank simply means consumers be careful on your dealing with us, be careful on romance with us because we have a problem. Brand equity of the bank is dented and damaged. Consumers should be wary and move towards withdrawing from the bank.”

Mr. Rufus Aluko, a Brand Strategist, Brand Foot Print Limited said, the brand may not have any internal crisis but put itself in premium platform refusing to compromise it position which would eventually dilute the brand equity should it decide to play second fiddle.

He said perception wise; the brand may be seen as unstable brand and full of internal crises.

Experts have said that the development, which has turned the West African biggest financial institution into a 'prostitute', is not helping the brand. Ekine posited that Ecobank seems not to grab with its better core competence and expertise, the position which is shared by Mr. Umunna and Aluko.

Now that the bank seems to have exhausted its combination arrangement in the Nigerian market, the capital market seems the likely option with its current proposition of additional N120 Billion capitalisation through initial public offering and private placement. However, who will believe they are serious after series of failed attempts?

Ecobank’s corporate image may be hanging in the balance, but with N120 Billion lining up to add to the capital base to the one of the West Africa financial institutions, it looks set to put it objectives back on track to becoming the biggest and strongest Africa biggest bank. One thing that remains at the back of consumers is: can a bank which suffers three attempted merger attracts investors?