Wigwe: Diamond Bank to Write off NPLs Before Merger

• Reassures staff of job security

Nume Ekeghe

Following its business combination deal with Diamond Bank Plc, the Group Managing Director/Chief Executive Officer of Access Bank, Mr. Herbert Wigwe, Thursday said the former would write off its non-performing loans (NPLs) before the deal is finalised.

This, he said, is necessary to protect the health of the new entity.

Wigwe said this when he appeared as a guest on ‘The Morning Show,’ programme of Arise TV, a broadcast arm of THISDAY.

He maintained that the merger would be of great benefit to all stakeholders, saying that concerns about NPLs in the tier II bank were fully considered before they entered into the business combination agreement.

He reiterated that there won’t be job losses even as he restated Access Bank’s plan to raise $250 million fresh tier II capital.

Responding to a question on the effect Diamond Bank’s NPLs would have on Access Bank, he said, “We are fully cognisant of all of those things, and one of the things we are doing is that Diamond Bank is determined to write off all of those loans before the date of legal merge.

“They would do so on December 31 and whatever the residue is from next year, that solves that problem permanently.
“So, we have enough capital to support the enlarged franchise which is important. Now all the benefits of recovering bad loans now become a plus because we have cut out what becomes a cancer and taken it out totally.

“So, we have a fresh, clean brand new franchise that is adequately capitalised. So, that concern people had of what is going to happen to the NPLs is taken out decisively and we have enough capital to go on.

“Even if we don’t recover any capital from it, it is a brand new world. We have gone through this many times before and we have recovered money.”

He also said the move to shore up the bank’s capital was to create a substantial capital adequacy ratio.
He said, “We have traditionally determined what our minimum capital ratio should be and it has nothing to do with what exists right now.

“We always create adequate capital buffers. For example, the Swiss Banking model, their regulator insists that they keep 19 per cent capital adequacy level not to talk of an emerging economy with risks like Nigeria.
“So, we have a determination to ensure that our capital adequacy level is north of 20 per cent and because we are a systemically important financial institution with presence across several continents and as a group, a bit more than that.”

In terms of the benefits of the deal, Wigwe maintained that Diamond Bank is bringing in its expertise in retail banking.

He said, “The benefit of this merger is that we are going to keep all of those unique things about Diamond Bank. They have an incredible mobile banking application; they have a way of reaching the mass market; we must ensure that we keep that emotional connect of that Diamond Bank’s retail customer which is very critical, so nothing would change.

“If anything would change is the fact that they would be more touch-points and for that woman in the market, payments get easier.

“Together, what we have created has 29 million customers, which is more than any other institution on the continent. You can say that there might be some duplication and if you go through that and the margin of duplications is probably around two to three million. So, if you call it 25 million customers, it is still a very large size of customers.

“And embedded in this, is about 10 million mobile customers. So, it is a great opportunity that cannot be compared to in other part of the continent.”

Continuing, he said, “It is a great time and it is a great opportunity, and the assurance I want to give all stakeholders, staff, shareholders and customers most importantly is the fact that this is a brand new world and there is something in it for everybody particularly our customers.

“Those who did not get enough of what they wanted in Diamond Bank now have a larger platform and it remains a safe institution. And for staff, obviously I am communicating with everybody and we are not asking people to go, it is certainly not on the table.

“All we seek to do is to create a value accretive enterprise. And for our regulators, what is important and what is critical is that we create a safe institution that is adequately capitalised and that is already happening.

“And I think for the government, the best way to look at it is that we have created an institution that would support the growth of our Gross Domestic Product, and an institution that would support SMEs that would lead to greater financial inclusion, greater financial deepening and all of those things which are required to propel an economy.”