South African banking group Nedcor said on Wednesday that the merger with BOE, which made it the country’s biggest banking group, was progressing well and that merger synergies were being realised earlier than expected.
It also confirmed it would meet the targeted merger synergies of R905-million each year from 2006.
For the six months to June, merger synergy benefits (on an annualised basis) of R190-million had been achieved, exceeding the initial forecast of R90-million, it said.
This translates to a R69-million income statement benefit for the six month period.
Nedcor’s strategic intent in its merger with BoE was to lay the foundation for future earnings growth by consolidating market shares and leveraging off its technology platform. Nedcor also used the opportunity to consolidate its organisational and regulatory structure and rationalise its brands.
Nedcor added that the once-off merger costs are projected to exceed the initial target of R710-million by R158-million. These costs are now projected to be higher than original projections mainly due to the complexity of migration initiatives to minimise customer impact, the group said.
The achievement of synergy benefits can be accelerated by investing more by way of once-off merger costs, so this will be done in the second half of this year, it added.
The process follows a structured approach as the group is implementing a complex merger while at the same time ensuring continuity of service to customers.
Key features of the merger planning process are the detailed tracking and measurement of all processes including 111 merger initiatives, the adherence to sound governance standards and the auditing of all activities to ensure proper reporting, it said.
The merger also follows a logical sequence with divisions having being selected for conversion priority depending on the functions they perform, the complexity of the conversions and dependencies on other divisions.
The merger and restructuring activities that have to a large extent been completed are: the “legal day one” process — where the banking licences of Nedbank, BOE, Cape of Good Hope Bank (CoGHB), Nedcor Investment Bank (NIB) and Peoples Bank were consolidated into two licences and the banks formally merged — went according to plan; the first three business unit integrations: the treasuries of Nedbank, CoGHB, NIB and BOE; the transfer of retail clients within CoGHB; and the integration of the capital markets division; the group risk management processes have been consolidated; and the merger support infrastructure was put in place to ensure fair and proper processes were implemented from a human resources perspective, that adequate communication was provided to staff and customers, financial information was available and the customer migration processes were in place. – I-Net Bridge