Performance evaluation of merged banks in Tanzania: the case of CF-Union bank Ltd and African banking Corporation Ltd

This study was conducted as an attempt to assess the impact of mergers on the performance of merged banks in Tanzania. The CAMEL model was used in assessing the performance of two banks, namely African Banking Corporation Ltd (ABCT) and CF-Union Bank Ltd (CFU). It covered the period from 1999 to 2006. The study used both primary and secondary. Interviews and structured questionnaires were used to collect primary data. The study used Hotelling's T2 to test whether there was a statistical significant change in the mean values of the performance indicator calculated before and after merger. Generally, the study had mixed results. The overall performance of CFU was observed to have changed favourably with ABCT changing unfavourably. Despite slight deterioration in capitalization level, the improvement for CFU was evident in assets quality, management quality, earnings quality, and liquidity. However, in the case of ABCT except for management quality all CAMEL components changed adversely. In conclusion, the study revealed that there was there no significant compelling evidence to support the assertion that banks' performance improve in post-merger period as compared to pre-merger period. It was further observed that, post-merger performance is highly linked with asset quality, thus the poor the assets quality the poor the performance. Tills was evident in the case of ABCT. Therefore, to improve post-merger performance banks' ABCT without exception among others should focus on strengthening its asset quality. Also, it is recommended that the GoT should review all laws and regulations that impeded the achievement of the expected banking sector efficiency.