Access Bank’s Race for Continental Expansion

Access Bank Plc has intensified its cross-border expansion in order to take advantage of opportunities in the African Continental Free Trade Area, which has been described as a potential game-changer for the continent, writes Obinna Chima

Inline with its expansion drive, Access Bank Plc last week entered into a definitive and binding agreement with ABC Holdings Limited to acquire 78.15 per cent shareholding in the African Banking Corporation of Botswana Limited (BancABC Botswana).

The transaction, which is subject to regulatory approvals and customary conditions precedent, is expected to close before the end of this quarter.

ABC Holdings is a subsidiary of London Stock Exchange listed group – Atlas Mara Limited.

The Nigerian bank disclosed this in a statement signed by its Company Secretary, Sunday Ekwochi.

Bostwana is renowned for its quality sovereign credit rating and stability. Access Bank’s market entry is expected to further solidify its strategy as, “a strong banking partner in key verticals across retail and corporate banking, including especially supporting trade in payments across southern Africa and Sub-Saharan Africa more broadly.”

Commenting on the deal, the Group Managing Director/Chief Executive Officer, Access Bank, Herbert Wigwe, said: “We remain committed to a disciplined and thoughtful expansion strategy in Africa, which we believe will create strong, sustainable returns for our shareholders and stakeholders at large, over the medium and long-term.

“The establishment of Access Bank through this acquisition in the Republic of Botswana will position the bank to deliver a more complete set of banking solutions to its clients active in and across the SADC and COMESA regions.

“This transaction complements our recent strategic growth acquisitions in South Africa, Zambia and Mozambique. We are building a bank of the future that Africans across Africa and the world would be proud of and look forward to welcoming the employees, customers and other stakeholders of BancABC Botswana to Access Bank.”

BancABC Botswana is the fifth largest bank in Botswana and is a very well-capitalised banking institution poised for growth and success in its local market. The bank has been perennially profitable, given an existing high-quality retail loan book with opportunities and scope for diversification and further expansion into corporate and SME lending.

Access Bank recently unfolded plans to expand to more African countries as part of a strategy to support trade and finance in the continent and take advantage of the newly formed African Continental Free Trade Area (AfCFTA).

According to Wigwe, across Africa, there is an opportunity for the bank to expand to high-potential markets, leveraging the benefits of AfCFTA.

He said AfCFTA, among other benefits, would expand intra-Africa trade and provide real opportunities for Africa.

He stated that the plan is for the bank to establish its presence in 22 African countries so as to diversify its earnings and take advantage of growth opportunities in the continent.

According to him, Africa has enormous potential and there are opportunities for an African bank that is well run, that understands compliance and has the capacity to support trade and the right technology infrastructure to support payments and remittances, without taking incremental risks.

“We believe that we are best positioned to basically do all of that. Our focus is to become an aggregator in Africa and we are building a global payment gateway and providing trade finance support and correspondent banking across the continent. We are focusing on the key markets.

“The approach would always be that in the country we wish to go to, that we have the right skills. We would not just be a drop in the country in which we are present, we would make sure that we have an impactful presence in each of the major countries in which we are present.

“In doing this, we are also mindful of the country we are going to so as to make sure that it is of benefit to the bank. As we do this, we are working with our friends and partners.

“We are diversifying our earnings away from volatile markets as well and we are orchestrating our operations from the global payments gateway and ensuring that using Access Bank UK, providing corresponding services from digital platforms, the overall profitability of our franchise,” he explained.

Commenting further, on AfCFTA, he said the bank would use its digital framework to benefit from the continental agreement.

“Coming to Nigeria, we think we need to continue to entrench ourselves in the local market because there is still so much work to be done.

“So, we are doing everything possible to satisfy our customers and also to ensure that our channels are adequately secured. We are also ensuring that our staff are very efficient,” the CEO said.

Since the commencement of the AfCFTA, analysts and stakeholders have expressed optimism about Nigerian banks’ readiness, saying the financial sector stands to benefit most from the continental agreement.

They noted that with most Tier-1 banks already operating in many African countries and are continually expanding, saying that would give them an edge over their counterparts in other African countries.

They added that with the increase in trade expected to spur economic activities and increased lending, many banks are already positioned to take advantage of AfCFTA.

The immediate past President of the Chartered Institute of Bankers (CIBN), Mr. Uche Olowu, said Nigerian banks with more trade will be in a better position to increase lending to the real sector which in turn will spur economic activities.

He said: “Banks are ready especially as banks have procured good lines that would support trading and supporting manufacturers, exporters, Nigerians products, which would thereby jumpstart economic activities.

“Nigerian banks are liquid and are prepared to lend out to those channels and outlets to serious manufacturers because it poses great opportunities for Nigerian banks and the Nigerian economy.

“Banks are there to intermediate and they have the information, data and all that it takes to support Nigerian businesses that are serious and credit worthy.”

Also, the President of Risk Management Association of Nigeria, (RIMAN) Mr. Magnus Nnoka, said Nigerian banks are well capitalised and have outlets across Africa which put them at an advantage.

Nnoka said: “We are amongst the most prepared country from the financial services point of view. Apart from a few banks in Egypt and South Africa, Nigerian banks are reasonably capitalised compared to other African countries.

“I think Nigerian banks, given their size today and given their track record, are prepared and positioned to attract partnerships that would also facilitate trade within the African block.”

On his part, the Head of Consulting, Agusto Consulting Limited, Mr. Jimi Ogbobine, said:

“In terms of the AfCFTA, the Nigerian banking industry is more prepared than banks from Ghana, Kenya and maybe it is the South African banks that can give them a challenge in terms of exploiting AfCFTA. But outside South African banks, Nigerian banks are the most prepared, especially when you are using footprints across the continents and for South Africa.”

In view of the opportunities that exist in the market, Access Bank recently disclosed plan to transit to a holding company (HoldCo) structure. The bank has received the Approval-in-Principle from the Central Bank of Nigeria for the restructuring and the HoldCo will consist of four subsidiaries in order to tap into the market opportunities that are available in the consumer lending market, electronic payments industry and retail insurance market.

Access Bank Group will consist of Nigeria, Africa and international subsidiaries, while the payments subsidiary will leverage the strong suite of the bank’s assets.

“Going into the fourth year of our four-year cyclical strategy, our focus remains on consolidating our retail momentum and expanding our African footprint in a sustainable manner,” Wigwe said.

In 2018, the bank launched its ‘Africa’s Gateway to the World’ campaign – a strategic initiative which aims to promote ‘access to finance’ in Africa and beyond. It started this campaign by leveraging technology to offer its consumers new products. An example was its partnership with Remita, which has offered PayDay loans to over five million external customers. The product was available on the web, through the bank’s USSD code, via ATMs, Access Mobile, WhatsApp Banking, and QuickBucks – its instant loan disbursal application.

Access Bank has also continued to strengthen its digital technology to propel both its sustainability targets and its African gateway strategic drive.

This was evident in the bank’s partnership with the Africa Fintech Foundry (AFF), aimed at nurturing the next generation of cutting-edge financial-technology firms.

Equally, Access Bank has been driving its revenue growth through retail expansion, which has grown consistently across all income lines, driven by a strong focus on consumer lending, payments and remittances, digitalisation of customer journeys, and customer acquisition at scale

It has also maintained strong capital levels despite investments for growth and has accumulated capital over time.

Its recently released financial statement for the year ended December 31, 2020, showed that despite a challenging economic and regulatory landscape, the bank beat analysts and stakeholders’ expectations.

In the period under review, the bank recorded gross earnings of N764.7 billion for the financial year ended December 31, 2020, which was a 15 per cent improvement from the N666.75 billion posted for the comparative period of 2019.

Profit before tax grew by 13 per cent to N125.9 billion from N111.9 billion, despite the high cost of operating the enlarged franchise and the increase in net impairment charge of near N43 billion arising principally from a Structured Trade Finance(STF) portfolio in the Access Bank UK.

According to the bank, the STF impairment is one-off/COVID related and recoverable over the next 12-18 months against insurance cover from world class insurers.

However, profit after tax (PAT) rose by same margin from N94.1 billion to N106 billion in 2020 on the back of a 32 per cent growth in operating income, which offsets the rise in impairment charges and operating expenses.

Customer deposits grew by 31 per cent to N5.59 trillion in December 2020, from N4.26 trillion, while net loans and advances grew by 18 per cent to N3.61 trillion, up from N3.0 trillion in 2019.

The board recommended a final dividend of 55 kobo per share bringing the total dividend to 80 kobo per share. As the bank intensified recovery efforts, it undertook significant write off and leveraged its risk management practices, its asset quality improved to 4.3 per cent, compared to its 2019 report of 5.8 per cent.

This is expected to continue to trend downwards as it strives to surpass the standard it had built in the industry prior to the merger with Diamond Bank.