Performance of Merged Banks in Tanzania: The Case of Anc Bank Ltd and Hbc Bank Ltd
Keywords:Bank mergers, Performance, , Financial sector reforms
This paper assesses the impact of mergers on the performance of merged banks in Tanzania using the CAMEL model. The study found no compelling evidence to support the assertion that mergers improve banks’ performance as the study had mixed results, both improvement and deterioration in some aspects. It was further observed that post-merger performance is greatly linked to the ability of the banks to strengthen the quality of assets. This is because deterioration in their quality affects both earnings and banks’ capital. The study recommends that banks institute robust risk- management systems to improve their performance in the post-merger period as well to increase product innovation in order to prudently invest their excess liquidity to maximize returns. At the industry level, the study confirmed that bank mergers are unavoidable due to the globalization in financial markets and increased competition in the market. It is thus recommended that policy makers/regulators in Tanzania examine the relevant policy matters necessary for the formulation of an appropriate platform and legal framework for bank mergers. As of now Tanzania’s regulators have yet to put in place prudential guidelines and/or regulations on mergers, except for listed companies.