Over the last two months, the once extensive Meridien BIAO's banking empire has been collapsing like a gigantic house of cards. When it was initially set up, this was to be the dream commercial bank network for the continent, "out of Africa and for Africa." The dream now seems to be lying in ruins. Joel Kibazo, (right) staff writer with the UK-based Financial Times has been closely monitoring the collapse of the African banking giant. This is his exclusive report for African Business.
"Our dream when Meridien started was to build a banking network out of Africa and for Africa; a bank that could take on the old colonial banks," so said a senior executive at Meridien BIAO.
Instead, the once high powered globe trotting executive was having to face up to the end of the dream. One by one, central bank authorities in Zambia, Kenya, Swaziland, Tanzania, Gabon, and Burundi announced the closure or took over the management of their local Meridien BIAO as a liquidity crisis engulfed the group. It was all a far cry from the high hopes of its early days.
Meridien BIAO is the result of a 1991 merger between the Meridien group's banks started by Mr Andrew Sardanis, a Cypriot born Zambian, and a network of 11 banks he bought from the French liquidator of Banque Internationale pour L'Afrique Occidental (BIAO).
Registered in Luxembourg, although it has never operated there, Meridien BIAO is 74% owned by Meridien International Bank Ltd (MIBL), which had a banking licence in the Bahamas. The African Development Bank holds a 10% stake and the Banque Ouest Africaine de Developpement (BOAD) has a 16% holding. It was capitalised at about $100m.
The group reported a net profit of $3.26m in 1993, the last year for which audited figures are available, but after currency translations its reserves declined by $15.2m in that year. MIBL is owned by Meridien Corporation, which is in turn owned by ITM International, a Luxembourg-registered private company controlled by the Sardanis family trust.
A lack of liquidity has dogged the group from its early days and Mr Sardanis admitted, "our problem has always been a shortage of capital". The liquidity problem appears to have been compounded by the 1991 merger, and well informed sources have indicated funds were taken from the more profitable banks in English-speaking Africa to shore up less profitable operations in francophone countries. The group also cited the 1994 CFA franc devaluation and high integration costs as another...