Could a merger backed by private equity be the lifeline banks need?

By Prince Owusu ASAMOAH

As foreign players reassess Ghana’s exposure and capital regulations tighten, a potential tie-up between two mid-tier banks could trade overlap for scale, if the numbers, culture, regulators, and crucially, investors align.

In recent years, Ghana’s banking sector has faced a perfect storm. Rising non-performing loans, regulatory tightening from the Bank of Ghana, and an economy strained by currency swings have all squeezed the general profitability of the sector.

Foreign banks, once dominant, are steadily retreating; Barclays rebranded as Absa, and Standard Chartered has scaled down its footprint. Concurrently, local mid-tier banks are striving to reinforce their market position and remain competitive.

Now, two very different institutions find themselves at a crossroads. One is a foreign-owned bank with a profitable but parent-fatigued operation; the other, a local player under pressure from thin margins and digital lag. Could their union, especially if backed by private equity capital and governance expertise, provide not just a survival strategy, but the foundation for a new Ghanaian champion?

Bank A: A Strong Bank with a Parent Looking to Exit

Bank A has long benefitted from the backing of its multinational parentage. Supported by strong processes, governance, and risk culture, it carved out a reputation for reliability in Ghana’s banking sector.

Unlike many of its peers, it remained consistently profitable, posting strong earnings even during the Domestic Debt Exchange Programme (DDEP) that wiped out profits across much of the industry. By 2024, it recorded return on equity above 20%, underscoring its resilience and robust credit culture.

The bank’s strongest niches remain trade finance and corporate banking, where it leverages international networks and correspondent relationships to support Ghanaian corporates engaged in cross-border business. Its disciplined underwriting and focus on traditional banking have helped it avoid the pitfalls that weakened many mid-tier banks.

Nonetheless, Bank A’s local strength has not shielded it from global boardroom decisions. Its parent company has launched a strategic review of African operations, signalling an appetite to exit select markets, including Ghana. The move reflects a global repositioning, not weakness in the Ghanaian subsidiary itself.

For private equity investors and local banks alike, this creates a rare opportunity: a profitable, well-governed institution with an established customer base and functioning infrastructure, standing on the threshold of ownership change. With the right capital partner, this transition could safeguard stability and unlock new growth.

Bank B: A Local Champion under Pressure

Bank B, on the other hand, has historically been positioned as one of Ghana’s most prominent indigenous banks, with roots stretching back several decades. Known for its strong local brand, wide reach and deep ties to Ghana’s mid-market corporates, the bank has often been viewed as a symbol of homegrown ambition in a sector historically dominated by multinationals.

However, in recent years, Bank B’s trajectory has faced significant headwinds. Profitability has weakened due to rising non-performing loans, elevated operating costs, and stiffer competition from larger incumbents and nimble Fintechs.

The bank’s steep losses in recent years have left a dent in its profitability and undermined its capital adequacy. Rising non-performing loans have amplified the strain, reflecting weakening underwriting discipline and a gradual drift from its core intermediation function.

Cost management has also emerged as a persistent weakness. Operating expenses remain elevated, with efficiency gains limited even as revenue generation falters. This imbalance has left the bank structurally less agile and unable to cushion profitability against shocks.

Equally concerning is Bank B’s lag in digital transformation. In a market where mobile and online banking channels increasingly define competitiveness, Bank B’s infrastructure continues to lag behind industry standards. The reliability of its platforms remains inconsistent, resulting in performance levels below customer expectations and reducing its ability to capture emerging opportunities in Ghana’s rapidly digitizing financial ecosystem.

Taken together, sustained losses, rising credit impairments, weak cost discipline, and poor digital infrastructure have heightened Bank B’s vulnerability. Unless decisive corrective measures and fresh capital are introduced, potentially through private equity investment or strategic partnerships, the bank risks sliding further into distress at a time when the sector itself is navigating tighter regulation and post-DDEP fragility.

The contrasting trajectories of Bank A and Bank B illustrate both the strengths and strains in Ghana’s mid-tier banking segment. Bank A’s adherence to traditional banking principles and robust underwriting has shielded it from the sector’s worst shocks, while Bank B’s eroding profitability, rising cost pressures, and faltering digital infrastructure have exposed its vulnerabilities.

Against this backdrop, the notion of a potential merger between the two is not merely speculative; it reflects the strategic logic of combining resilience with scale, operational discipline with market reach, and multinational backing with agile local presence.

Strategic Fit & Rationale

The potential merger between the two banks presents a compelling case for consolidation in Ghana’s banking sector. While both institutions have faced their fair share of the sector’s challenges in recent years, their distinct strengths and weaknesses suggest that a combined entity could emerge stronger, more efficient, and better positioned to compete.

From a synergy perspective, the merger would allow the banks to leverage complementary business models. Bank A offers international governance standards, disciplined risk management, and access to global expertise, while Bank B brings deeper penetration in the domestic SME and retail markets. Together, they could capture a broader client base and expand market share, establishing themselves as a formidable player against larger incumbents.

The merger could also result in cost efficiencies. The rationalization of overlapping branch networks, consolidation of operations, and integration of back-office functions would reduce structural inefficiencies. Streamlined IT and support systems could further lower costs while improving service delivery.

A merger would also contribute to capital strengthening and risk diversification. Bank A’s relatively stronger capital buffers could help improve Bank B’s balance sheet strength, while the pooling of resources would provide greater resilience to macroeconomic shocks. Diversification across loan portfolios could mitigate Bank B’s elevated non-performing loan exposures, improving the overall risk profile of the combined entity.

In terms of digital transformation, Bank B’s digital infrastructure gap could benefit from Bank A’s global platforms and technical know-how. This would enable the merged institution to accelerate its transition into digital-first banking, offering more competitive products and services in a market where customer expectations are increasingly shaped by technology.

Ultimately, the merger offers a path toward strategic repositioning. By blending international best practices with local market expertise, and with private equity serving as a catalyst, the combined bank could deliver stronger governance, broader customer reach, and more sustainable profitability. In doing so, it would not only stabilize its financial footing but also strengthen its long-term relevance within Ghana’s evolving banking landscape.

Possible Deal Structures

The crux of any potential merger between the two mid-tier banks rests not only on strategic fit but also on how the deal is structured, given the fragile position of both parties. Bank A’s parent company has expressed its intent to exit the Ghanaian market, while Bank B continues to grapple with profitability pressures, rising non-performing loans, and an underwhelming digital backbone. These realities could complicate the transaction but also open creative pathways for structuring a deal that addresses the interests of both parties.

Three broad deal structures appear feasible:

Outright Acquisition by Bank B

In this scenario, Bank B would acquire Bank A, effectively absorbing its operations, branch network, and customers. Financing could involve a mix of equity raise and debt, though Bank B’s current balance sheet constraints would make this challenging.

• Upside: Bank B would expand its scale, improve market share, and gain access to Bank A’s relatively stronger credit underwriting systems.
• Downside: Funding the acquisition could overstretch Bank B, especially given its weak profitability, rising NPLs, and weak balance sheet strength. Integration risks (including challenges in merging IT systems, meeting regulatory requirements, managing staff and culture, and retaining customers) could also be high without significant capital injection.

Reverse Takeover Backed by Private Equity

Here, a private equity investor would step in, acquire Bank A from the parent, and then merge it with Bank B. Structurally, this would resemble Bank A taking over Bank B, but in effect, the PE investor would control the combined entity.

• Upside: Fresh capital is injected, integration would be easier under a stronger balance sheet, and the new investor would benefit from both banks’ footprints and respective strengths.
• Downside: Execution would depend heavily on attracting a credible investor with appetite for Ghana’s banking sector, which may be difficult given Ghana’s current macroeconomic climate.

Merger of Equals with Capital Support from Private Equity or Local Institutions

Both institutions would merge on near-equal terms, creating a larger entity with combined assets, branch networks, and customer bases. However, success here would hinge on raising additional capital, either from private equity, local institutional investors (such as pension funds), or multilateral financial institutions willing to back the banks’ consolidation.

• Upside: Shared risk, broader market presence, and an opportunity to redesign the banks’ business model with PE oversight, focusing on digital-led growth and stronger credit underwriting.
• Downside: Without adequate fresh capital and governance reinforcement, the merger could simply create a larger but still fragile bank.

The most workable pathway likely lies between the second and third options, either attracting a private equity investor to back the merger, or creating a merger of equals supported by external capital injection.

An outright Bank B-led acquisition, though theoretically possible, would appear least viable given Bank B’s weakened financial state. Ultimately, whichever structure is pursued must prioritize capital strengthening and digital transformation, areas where private equity can play a catalytic role, otherwise the combined entity would risk inheriting more problems than opportunities.

Regulatory & Market Considerations

Any merger between the banks would fall squarely under the scrutiny of the Bank of Ghana (BoG), the Securities and Exchange Commission (SEC), and the Ghana Stock Exchange (GSE). The regulators’ primary lens would be financial stability, ensuring that the merger does not create systemic risks but instead strengthens the sector.

For the BoG, the calculus would be straightforward: a merger between these two entities would offer a credible path to recapitalization, stronger governance, and enhanced market share, aligning with BoG’s long-standing push for consolidation in Ghana’s banking industry.

From the SEC and GSE standpoints, the merger could deepen liquidity in the market and improve investor sentiment, provided that deal transparency is upheld. However, valuation disputes (offering a premium or discount to market prices for both banks), particularly given Bank B’s weakened position, could complicate negotiations and influence how investors react.

The market itself may initially treat the deal with caution. Depositors would seek clarity on service continuity, while corporate clients would look for evidence of a stronger lending pipeline. If the merged entity can articulate a convincing narrative of synergy realization and digital modernization, confidence would build quickly. If not, the risk of depositor flight or investor scepticism could rise.

Strategic Implications & Forward Outlook

If executed well, a merger between Bank A and Bank B would reshape the competitive landscape of Ghana’s banking sector. The combined entity would command a stronger balance sheet, a broader customer base, and deeper corporate relationships, potentially elevating it into the top tier of local banks.

For Bank B, the deal would offer a path to renewed operations and market access. With access to Bank A’s international networks and operational systems (if retained during the transition), it could stabilize earnings, rebuild investor trust, and accelerate digital transformation. For Bank A, an exit through a merger would allow its parent company to preserve value while leaving behind a sustainable footprint, rather than a messy withdrawal.

At a macro level, the deal could signal to the market that banking consolidation in Ghana is not just regulatory rhetoric but a pragmatic solution to structural weaknesses. It may even trigger a wave of smaller banks seeking similar tie-ups to survive and then thrive.

This is where private equity’s role becomes pivotal. Beyond capital injection, a PE investor would bring performance discipline, hands-on governance, and a clear value-creation strategy. By driving digital modernization, rationalizing operations, and strengthening risk management, private equity could ensure the merger delivers on its promise rather than becoming another case of unrealized synergies.

That said, execution is everything. Mergers in Ghana’s financial sector have historically struggled with integration issues, cultural clashes, and unrealized synergies. Without strong governance, clear communication, and disciplined integration planning, the merger could easily become another cautionary tale rather than a model for renewal.

In the near term, stakeholders, from regulators to customers to investors, would be watching one thing above all: whether the merged entity, with PE backing, can translate size into strength and deliver better products, more resilient capital, and long-term value.

Conclusion

The potential merger between Bank A and Bank B would be more than just a financial transaction, it could be the litmus test for the future of Ghana’s banking sector. On paper, the deal could offer a lifeline to two institutions facing different but equally pressing challenges: one seeking a dignified exit, the other fighting for renewed stability. Together, they could unlock complementary strengths and build a more competitive force in the market.

Nonetheless, the path ahead would not be straightforward. Execution risks, regulatory hurdles, and cultural integration could loom large, and history shows that size alone does not guarantee success. What will matter most is whether the merged entity can maintain focus, deliver on synergies, and restore confidence among customers and investors.

If successful, this merger could mark the beginning of a new era of strategic consolidation in Ghana’s financial landscape, one that favours stronger, more resilient banks. If not, it risks becoming another reminder that in banking, as in business, not every marriage of convenience leads to lasting stability.

The writer is an Investment Analyst at Injaro Investment Advisors Ltd, a firm dedicated to building sustainable African businesses that generate both social and economic value. At Injaro, Prince plays a pivotal role within the Asset Management division, where he supports the firm’s private equity and portfolio management activities. His work spans financial analysis, research, and value creation initiatives aimed at driving sustainable growth across portfolio companies.