The Financial And Operational Consequences Of An Acquisition Finance Essay - Free Essay Example

I have chosen to write on the topic number 19, an Analysis of the Financial and Operational Consequences of a Merger between the SSB Bank and the Societele General. The pre-merger and post-merger periods between 2002 and 2008 where information was available was also considered. This report examines in detail the performance of the SG-SSB bank as compared to its rival bank, HFC bank. 1.2 REASON FOR THE CHOSEN TOPIC Acquisition has become one of the most common and recent business strategies that most businesses have adopted to sustain and enhance growth in their companies. Recently, it is up-surging in most financial institutions such as the bank. In Ghana, the SSB bank which was one of the top four banks in Ghana acquired by the Societele Generale of France. The financial industry is consolidating at an accelerating pace: the integration of financial markets has blurred distinctions between activities such as lending, investment banking, asset management, and insurance. Firms have reacted to the sharper competition by cutting costs and expanding in size, often by merging with competitors or taking them over. Long isolated by protective regulations, banks are among the most active players. Technological innovations and a thorough-going deregulation have prompted a wave of mergers in the banking industry throughout the world, starting in the United States in the eighties and reaching Eur ope in the nineties Focarelli et al (2002) p1047. So much has been written about the success and failures of mergers and acquisition. Almost every week we hear of both success and failure of companies going into consolidation. The acquisition of the SSB bank by the Societe Generale bank is one of the major Acquisitions in the history of the Ghanaian banking industry. Being among the top performing banks in Ghana since its incorporation, I will like to know the effect the Societe Generale bank has had on the SSB bank after the acquisition and whether it is financially viable for other financial institutions to follow suit. 1.3 OBJECTIVES OF THE RESEARCH The main reason behind this research is to find out whether the acquisition of a company in this case, bank will have any financial or operational effect on the combined institutions. To get the answer to this research, the following research questionnaires have been developed in other to reach a viable conclusion; Has there been any significant change on the market size of SG-SSB bank since acquisition? Has there been any improvement in profitability and efficiency since the acquisition? Has there been any improvement on the assets quality of the bank? In terms of performance, how does the bank compare with other mirror banks? On comparing the pre and post acquisition performance of the bank and its closest rival bank the answers to the research question will be attained. 2.0 INFORMATION GATHERING 2.1 SOURCES USED AND REASONS FOR THEIR USE Ghana Banking Surveys (2007, 2008 and 2009); Much reliance was placed on the Ghana Banking Surveys (2007, 2008 and 2009) as published by the PriceWaterHouseCoopers Ltd. As a secondary source, information relating to the industrial position of SG-SSB bank amongst other benchmarking banks was sourced from here. Here, the rival bank, HFC also has its financial and operational information recorded from the Ghana Banking Survey. This information was relevant for comparison, analysis and discussion. 2009 Annual Reports of the SG-SSB bank; I read through the 2009 annual report of the SG-SSB bank plc and here the most recent information about the operating result for 2009 which was not recorded in the Ghana banking surveys was gathered and utilised. They were the basis upon which the analysis was built. Books and Journals: Books provided information and idea on what other writers have written about the topic. Some of the books being; Understanding  return  on investment and Business Finance for Managers: An Essential Guide to Planning, control and decision-making plus other books and journals relating to mergers and acquisitions. These books and journals provided me with in-depth understanding of the chosen topic. Ghana Stock Exchange; The SG-SSB bank, being a public company has been listed on the Ghana stock exchange and that I was able to read about the banks portfolio and other relevant information about the performance of the bank from its website. Director / Chairmans Statement; This was helpful in establishing the significant development of the bank since the acquisition compared to the pre-acquisition years. Internet Websites; It was much easier and quicker using the internet websites to research information. Most companies use the internet through their company websites to upload their profile and other relevant information relating to the company. In this case it becomes easier to get loads of information at one go. In this resea rch for instance, industry specific information relating to the SG-SSB bank was sourced from its website and same applies as the HFC bank. Other websites such as the PWC.com was helpful in getting the Ghana banking surveys for my analysis. Limitation; Could not get access to the pre-acquisition and some of the post- acquisition annual reports as most of them were archived in hard copy format only except for the 2009 annual report which is in the softcopy format as well. 2.2 METHOD OF DATA COLLECTION USED Library Research; General reading; Internet Websites; Primary Data Collection The only primary research conducted was the interview with one of the SG-SSB banks branch managers. This was aimed at gathering not only the past information relating to the acquisition but also the current and future prospects of the bank. Despite the limitation of the information gathered, the few provided was enough to support the objective of this research. Secondary Data Collection Limitation Ethical Issues 2.3 ACCOUNTING AND BUSINESS TECHNIQUES USED; Key performance measurement tools information relating to the pre-acquisition period was compared to the post acquisition period to achieve result and to examine whether the combined entities are better together or better apart. The following techniques were relevant for the purpose of this research and that they were relied on to reach a conclusion; Profitability and efficiency Under profitability and efficiency, return on assets net interest margin and profit after tax margin were relevant. The return on Assets (ROA); The profit after tax margin; The net interest margin Market Share Share of the industry deposit, Share of the industry total asset Industry advances. Return to shareholders Return on Equity(ROE). Assets Quality Loan portfolio profitability; Liquidity Liquid funds/ total deposits; Capital Structure and Financial Risk Net loans and advances/Equity 3.0 ANALYSIS AND PRESENTATION 3.1 OVERVIEW OF THE SG-SSB BANK LIMITED As one of the major leading banks in Ghana, SG-SSB bank since its incorporation in February 7, 1975, has been very active in the Ghana Banking industry. It started as a private limited liability company using the name Security Guarantee Trust Limited. It was then solely owned by the Social Security And National Insurance Trust (SSNIT). A year after the incorporation, the name of the bank was changed to Social Security Bank Limited and granted a licence by the Bank Of Ghana to officially operate as a bank. In May 1994, the bank merged for the first time with National Savings and Credit Bank but maintained its name as Social Security Bank Ltd. The then Social Security bank limited was listed on the Ghana Stock Exchange in October 1995. In 1997, a group of strategic investors, made up of Blakeney Management Corporation UK, Morgan Stanley, Quantum (Soros) Emerging Market Investment Corporation and others bought 52% of the banks issued shares. The Social Security bank changed its nam e to the SSB bank www.sg-ssb.com.gh. In March 2004, the Socià ©tà © Gà ©nà ©rale of France acquired 51% of the SSB banks share thus controlling the interest in the company and making the SSB bank one of its subsidiaries. The bank now can boast of thirty-eight branches across Ghana. It services extends to corporate customers, Individuals and Small and Medium Enterprises www.sg-ssb.com.gh. The Societe Generale of France is one of the leading banks across Europe and aims to be the top Brass in the banking industry in France. It operates in global investment management, retail banking and investment banking. It also extends its operations in the USA and in Africa in the francophone countries. Societe Generale has about 3000 branches in France and 5300 locations globally (www.hoovers.com)(www.societegenerale.com). 3.2 SG-SSB POST-ACQUISITION OWNERSHIP STRUCTURE The ownership structure of the bank changed as soon as the Societele Generale finished the transaction. According to information published on the SG-SSB company website, the Societele Generale holds 51% of the overall company shares whereas the Social Security National Trust Fund (SSNIT) also holds 21.61%. The remaining 27.39% is owned by Retail Shareholders. This makes Societele Generale have controlling interest in the combined entity. www.sg-ssb.com.gh 3.3 OPERATIONAL ANALYSIS Table 1 Total operating assets 2002. Gh.cedis 2003. Gh.cedis 2006. Gh.cedis 2007. Gh.cedis 2008. Gh.cedis Pre Acquisition industry ranking Post Acquisition industry ranking SG-SSB 1,602,515 194,572 3,424,257 390,220 410,692 5 8 HFC 321,027 47,125 1,024,364 155,036 364,677 12 10 Source; Ghana Banking Surveys 2007, 2008, 2009 FIGURE 1 The post-acquisition performance compared to the pre-acquisition performance of the total operating assets of the combined entity has been very unstable. This is because, as at the year before the acquisition took place, the operating performance of the assets was at 1,602,515 Ghana cedis. The next year being the year of acquisition, 2003, the operating assets were at its very low at 194,572. Despite all of these, the bank managed to surge in year 2006 at a 3424,257 cedis, but then later lowered again in year 2008. As at the pre-acquisition year that is the year 2002, the SG-SSB bank was ranked number 5 among the rest of the banks in the banking industry in Ghana. It later dropped to 8th position in the year 2008 which is after the acquisition. Comparatively, the HFC bank was at best as well in year 2006 but in year 2002, it had 321,027 whereas in 2008 it re-surged to 364,677cedis. Even though SG-SSB bank was higher in industry ranking than the HFC Bank, the HFC Bank got a positive change of ranking moving from the its 12th position in year 2002 to the 10th position in year 2008. The SG-SSB bank achieved better results as compared to the HFC bank in the pre-acquisition years than the post acquisition years. 3.4 MARKET SHARE TABLE 2 Share of industry deposits bank 2002 % 2003 % 2004 % 2005 % 2006 % 2007 % 2008 % Pre-Acquisition industry ranking Post-Acquisition industry ranking SG-SSB 8.62 7.68 7.44 6.95 6.52 5.1 3.9 4 10 HFC 0.29 0.66 0.81 1.09 1.53 1.5 1.4 18 19 Source; Ghana Banking Surveys 2007, 2008, 2009 FIGURE 2 The difference in the share of industry deposits for the two banks, SG-SSB and the HFC Banks is large. In that, the SG-SSB bank being in the 4th position in the pre-acquisition period, 2002, it had a rate of 8.62% whereas in year 2008 at a decreased rank of 10, it had dropped to a 3.9%. From the table, it can be seen that, this began to decrease just on the year of acquisition, 2003. Relatively, the HFC Bank had a 0.29% share in the industry deposit in year 2002 increasing gradually to 1.4% in 2008. Despite the up-surge, the HFC Bank could not better its rank position from the 18th position, but rather dropped one to reach the 19th position. This shows that the SG-SSB bank did not do any better in the share of industry deposits after the acquisition as it dropped in ranking. TABLE 3 Share of industry net advances Bank 2002 % 2003 % 2004 % 2005 % 2006 % 2007 % 2008 % PreAcquisition industry ranking PostAcquisition industry ranking SG-SSB 9.83 8.39 6.61 7.84 6.16 5.7 5.3 5 7 HFC 3.82 2.40 2.05 1.88 2.87 2.8 2.6 8 14 Source: Adapted from Ghana Banking Surveys 2007, 2008 and 2009 FIGURE 3 Here also, the share of industry net advances for the SG-SSB Bank has fallen to a 5.3% in year 2008 from 9.83% and 8.39% in 2002(pre-acquisition) and 2003(year of acquisition) respectively. This caused a reduction in the industry ranking from 5th position in the pre-acquisition period to 7th position in the post-acquisition period. It can also be seen that between the years 2004 and 2007, the share began to rise bit by bit but could not hold on to it in 2007 and 2008. The HFC Bank did not do very well either, as it also dropped from its 3.82% in 2002 to 2.6% in 2008 eventually falling from the 8th position in year 2002 to 14th position in 2008. This indicates that the pre-acquisition pe riod of the SG-SSB Bank was better compared to the post-acquisition period. TABLE 4 Share of industry total assets Bank 2002 % 2003 % 2004 % 2005 % 2006 % 2007 % 2008 % industry ranking-2002 industry ranking 2008 SG-SSB 9.01 8.23 7.84 8.07 7.11 5.7 5.3 5 7 HFC 1.81 2.02 1.91 1.95 2.08 2.8 2.6 7 14 Source: Adapted from Ghana Banking Surveys (2007, 2008 and 2009) FIGURE 4 The share of industry total assets for the SG-SSB Bank has not been any better than the share of industry net advances. This also had a good share of the industry total assets in the pre-acquisition year 2002, but started to drop slowly from the year of acquisition, 2003, down to the post-acquisition years. This reflects the meaning of the downward fall in the industry ranking of the SG-SSB Bank from the 5th position to the 7th position in 2002 and 2008 respectively. Similarly, the HFC bank has also fallen from the 1.81% share it used to have in year 2002 to 2.6% in year 2008. Causing a fall in the industry rank by seven (7). In the light of the above information, it can be said that the SG-SSB bank ha s not improved since the acquisition in terms of its share in the industrys total assets. The pre-acquisition achievement was better than the post-acquisition achievement. 3.5 PROFITABILTY AND EFFICIENCY TABLE 5 Return on assets (ROA) BANK 2002 % 2003 % 2004 % 2005 % 2006 % 2007 % industry rank 2002 industry rank 2007 SG-SSB 4.64 4.62 4.7 3.5 3.0 3.0 6 7 HFC 5 4.20 3.0 1.1 1.4 2.4 3 10 Source: Adapted from Ghana Banking Surveys (2007, 2008 and 2009) FIGURE 5 The Return on Assets which can be measured as the ratio of net income to total assets was also used to access the performance of the banks which participated in the survey. The Return on Assets indicates how profitable a company is in terms of its available assets. Friedlob and Pewab(1996) p225 referred to return on assets  (ROA) as a ratio measures the operating efficiency of a company and it is mostly used for investment centers. It provides evidence as to how well firm directors are using the assets they manage to generate profits. From the above, it can be seen that as at the year 2002, the return on assets of SG-SSB bank was better than two years after the two banks came together. Year 2004 was very good year as the SG-SS B bank was much more profitable than the years afterwards. On comparison with the HFC banks, it can be seen that as at the year 2002, the return on assets was 5%, this also kept decreasing until it hit its low of 1.1% in 2005 and 1.4% in 2006. In terms of industry ranking, the SG-SSB bank hit below their 2002 ranking from their 6th position to the 7th position. The HFC was at its high in industry ranking in year 2002 at the 3rd position but could not stay there for long until it reached 10th position in year 2007 TABLE 6 Net interest margin 2003 % 2004 % 2005 % 2006 % 2007 % 2008 % industry ranking-2003 industry ranking 2008 SG-SSB 13.09 11.62 11.24 10.18 8.8 9.5 2 5 HFC 10.17 9.79 8.63 7.80 9.1 6.1 6 15 Source: Adapted from Ghana Banking Surveys (2007, 2008 and 2009) FIGURE 6 According to Bitner and Goddard (1992) p265 net interest margin can be referred to as the difference between the average interest rate received on the assets and the average interest rate paid on the liabilities. This can be expressed as: Net Interest Margin= (Total Interest Income-Total Interest Expense) / Average Total Assets From the above table, it can be seen that the net interest margin for SG-SSB bank as at the year of acquisition was better than the post acquisition years. At 13.09%, the bank was ranking second in the year 2003. At time went by, it began to decline slowly to 8.8% in 2007 and 9.5% in 2008. Compared to HFC bank, they were doing well as well by having 10.17% net interest margin in 2003 bu t had a sharp decline in 2008 at 6.1% moving them from the sixth position it was enjoying in year 2003 to a lower industrial ranking in 2008 at fifteen. Here it can be said that the average total interest income for SG-SSB bank significantly outweighed the average total interest expense as at the year of acquisition which contributed to the high performance on the year of acquisition. TABLE 7 Profit after Tax Margin 2002 2003 2004 2005 2006 industry rank 2002 industry rank 2006 SG-SSB 24.3% 25.3% 27.9% 21.3% 19.9% 9 11 HFC 32.8% 42.3% 28.7% 12.2% 15.0% 2 13 Source; Ghana banking survey 2007 FIGURE 7 Profit after tax margin measures the effectiveness of a company in generating profit through its efficient monitoring of expenses. Here, it can be seen that, the SG-SSB bank performance was not very good. This could be as a result of inefficient control of their expenses. This is evidenced by their industrial ranking from the 9th position in 2002 to the 11th position. Despite this downfall in profit after tax margin, the SG-SSB bank was better efficient in year 2004 than both the pre-acquisition year 2002 and post-acquisition year 2006. In the case of HFC bank, it also went down from a good yielding percentage of 32.8% in 2002 to a 19.9% in 2006 despite its best performance in 2003 at 42.3%. Here, even though SG-SSB bank achieved better compared to HFC bank in 2006, SG-SSB bank still could have performed better looking at its merging and the injection of capital from the Societele Generale. 3.6 RETURN TO SHAREHOLDERS TABLE 8 Return on equity (ROE) Bank 2002 2003 2004 2005 2006 2007 2008 industry rank 2002 industry rank 2006 SG-SSB 29.8% 30.0% 30.6% 24.3% 20.4% 20.0% 22.3% 9 11 HFC 30.1% 24.5% 17.5% 7.1% 11.4% 26.9% 20.8% 2 13 Source: Adapted from Ghana Banking Surveys (2007, 2008 and 2009) FIGURE 8 According to the Ghana banking survey 2007, the banking Return on Equity decides on the return to be generated from the shareholders equity. The higher the ratio, the better the bank looks to be performing. Tracy J (2008) p286 explained it further by adding that the return on equity shows the amount of profit a business earned in comparison to the book value of the shareholders equity. This can be expressed as; Return on Equity= Net Income/shareholders equity. 3.7 ASSET QUALITY TABLE 9 Loan portfolio profitability 2002 % 2003 % 2004 % 2005 % 2006 % 2007 % 2008 % industry rank 2002 industry rank 2008 SG-SSB 15.28 12.11 17.33 12.60 12.98 9.11 9.9 12 18 HFC 1.35 0.02 3.19 3.70 6.14 12.33 17.8 17 4 Source: Adapted from Ghana Banking Surveys (2007, 2008 and 2009) FIGURE 9 According to Bitner and Goddard (1992) in asset quality management, much of the value of the banking process is created by able to manage credit risk and that the funds obtained from depositors are used to advance loans. The Ghana banking survey, 2007 indicates that, Loan Portfolio profitability is a measure of the performance of the classes of the loans from the bank. If the ratio is high then the performance is better for the relevant bank, in this case the SG-SSB. From the above, it can be seen that the management of the asset quality in terms of the loan portfolio has not been very good for SG-SSB but has grown to be better for the HFC bank. The SG-SSB bank had moved from a lower rank of tw elfth position in 2002 to a much lower rank of eighteenth position in 2008. This could be that the management of the different classes of the assets in the bank is not very efficient in terms of yielding profitability. Comparatively, the HFC bank continued to improve its performance in the asset quality moving from a lower industrial position of seventeenth to fourth position. 3.8 LIQUIDITY TABLE 10 Liquid funds/ total deposits 2002 2003 2004 2005 2006 2007 2008 industry rank 2002 industry ranking 2008 SG-SSB 1.00 0.95 0.97 0.85 0.85 0.63 0.41 6 19 HFC 2.78 2.24 1.84 1.21 0.64 0.61 2.01 1 2 Source: Adapted from Ghana Banking Surveys (2007, 2008 and 2009) FIGURE 10 The Ghana banking survey 2007 indicates that, the Liquid funds/ Total deposits decides the cover of the liquidity provided by the SG-SSB bank to meet with its maturity and withdrawal of the bank deposits. Here the higher the ratio the better, as at year 2002 the SG-SSB had a good liquidity funds to total equity at 1 but then began to decrease. The year 2008 it declined to 0.41 with an industrial ranking of 19th position, which indicates that SG-SSB bank was not performing well after the merger. On comparing this with the mirror bank, HFC, the HFC bank performed outstandingly better than the SG-SSB bank in both years 2002 and 2008 having a 2.78 a nd 2.01 liquid funds to total equity respectively. This outstanding performance positioned the bank in the industrial ranking at first position in 2002 and second position in 2008. 3.9 CAPITAL STRUCTURE AND FINANCIAL RISK TABLE 11 Total assets/ equity 2002 2003 2004 2005 2006 2007 industry ranking-2002 industry ranking 2007 SG-SSB 6.61 6.40 5.53 5.54 6.38 7.15 5 18 HFC 6.08 5.75 6.11 6.69 9.91 12.37 4 9 Source: Adapted from Ghana Banking Surveys (2007, 2008 and 2009) FIGURE 11 This measures the financial leverage and the long-term solvency and can be expressed as; Asset to Equity = Asset/Equity In other words this represents the overall assets of a company divided by the value of its owners equity. From the above, it can be seen that as at the pre-acquisition year 2002, the SG-SSB bank had a good leverage and that its total assets to equity was better than the current in year 2007 despite the great performance of the HFC bank in both the pre and post acquisitions periods. In this ratio, the lower the ratio the better the performance of the company in question, the HFC was able to maintain its lead over the SG-SSB bank even though it h ad fallen from the fourth position in year 2002 to the ninth position in year 2007. Comparing this with the post-merger performance on 2007, the SG-SSB bank drastically fell to its eighteenth position in terms of the industry ranking in 2007 3.10 INTERVIEW WITH BRANCH MANAGER In an interview with one of the branch managers of he explained that the main reason why the bank went into merger with the French bank Societe General was because as at that year of acquisition, 2003, the Government of Ghana wanted to withdraw its shareholdings from the former SSB bank and so the bank needed some financial funding to be injected into the bank as the Government withdraws its shareholdings. It was also revealed that apart from the injection of cash into the bank by the Socià ©tà © Generale, the bank also undertook to lay-off about one-hundred and twenty staff and three senior management staffs but the effectively trained the retained staffs and improved the staff welfare. He also said that unfortunately despite the huge injection of cash to fuel the going concern of the combined entity, the size of the customers was very much affected adversely after the merger and this is due to high competition and better facilities being offered by other immerging mirror banks. In general, he described the overall performance of the bank compared to the pre-merger years as weakening and that if there should be any improvement in the bank again the market size and the profitability should be improved. He however refused to comment on whether the bank was enjoying any reliefs from the inland revenues services in terms of taxation. He also said that on comparing the SG-SSB bank with its rival banks like the HFC bank (the mirror bank in this research), the Barclays Bank of Ghana and the Standard Chartered bank, the SG-SSB bank will need to back up to improve its market shares. He considers the pre-merger years as much more effective than the post merger years. OPERATING RESULT FOR 2009 Despite the growing concern of the world economic downturn and the extensive loss of consumer confidence in year 2009, the 2009 annual report recorded that the SG-SSB bank exhibited a good financial performance in that year against the challenging banking industry in Ghana. It recorded a net profit before taxation of 26,909,570GHcedis and a net profit after tax of 19,293,069GHcedis. As at that same year of the recession, SG-SSB bank was able to record an increase in the net banking income by 18.75%. Sadly, the current operating expenses grew by 23.8%. The shareholders funds also experienced an increase from 69,671,327GHcedis to 110,193,426GHcedis representing a surged of 58.16%. The share price of the bank as at the beginning of 2009 was better at 1.15GHcedis per share nonetheless in the second half of the year it fell to 0.58GHcedis. Here the chairman indicated that this was because the bank had a recapitalisation in that period. Unfortunately, as at December 2009 the sha re price had further fallen from its unwelcomed 0.58GHcedis to 0.46GHcedis. SIGNIFICANT POSITIVE CHANGE- CURRENT YEAR (2009) COMPARED TO THE PRE-ACQUISITION YEARS The Managing Director of the SG-SSB bank also indicated in his statement that the bank has initiated some development plans to achieve a good competitive ground and to attract new customers while improving credits and deposits. These development plans had already started in the year 2009 some of which are; Significant Milestones for the year 2009; Compared to the post-acquisition years, one of the positive impact the Societele Generale brought in the bank was able to increase the banks equity base from 7,000,000GHcedis to above 60,000,000GHcedis, a figure high and above the required threshold of the Bank of Ghana. Effective risk supervision continues to be active in the bank since the and that the bank has added some new functions to ensure the permanent supervision and compliance with the anti-money laundering and Business continuity plans. There was the full integration of all the functions in the year 2009. Further to this, the Managing director also affirmed that the q uality of the banks credit risk assessment is continually being maintained at a good level compared to the pre-acquisition days. There has also been developments in organisation and project management, here unlike the pre-acquisition years, the bank took part in a projects initiated by the Central Bank called the Cheque Codeline Clearing and Automated Clearing House. As confirmed by the branch manager in his interview, the managing director affirmed that since the acquisition of the bank by the Societele Generale, there has been a positive drive in the human resource management where the HR department has effectively encouraged management trainee programmes to attract and hire graduates for leadership positions in the bank. This training will in the end impact significantly and positively in the market share of the bank. 4.0 CONCLUSION The main reason behind this research is to identify the financial and operational consequences of a merger between the SSB and the Societele Generale banks. From the available information as published by the PriceWaterHouseCoopers ltd, it can be seen that, the Market share performance in terms of the share of industry deposits and share of net advances had declined and that shows that the combined entities are not enjoying the benefit of synergy in terms of the size of their market share and power as discussed by Khan and Jain (2006) p17.3, where they said that Synergy should add value to the business by the enlargement of the market share rather than decreasing it. More so, the return on assets, net interest margin and the profit after tax margin all started to decline just after the merger. This is because, when the level of market share of the combined entity has decreased, and consequently it will adversely affect the level of profitability as well. The amount of profi t the SG-SSB bank has been enjoying declined as it is not able to get enough out of the owners equity, hence the decrease in the return on equity. Furthermore, the interview revealed that there was also the issue of downsizing after the merger. The Societe Generale decided to decrease the amount of workforce to avoid duplication of duties and above all to reduce the labour cost. 4.1 Recommendation Kaplans balanced score card will be appropriate for the management of the bank to adopt to monitor the performance of the combined entity. Kaplan explained it as a strategic planning and management system which can be used extensively in businesses and industries, government, and not-for-profit organizations globally to support business activities to the vision and strategies of the business entity, improve communication, and monitor the performance of businesses against corporate goal. www.balancedscorecard.org