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Access Bank: Riding on the back of the African market for growth

Joseph Oyekanmi

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Access Bank: Riding on the back of the African market for growth

Access Bank’s inroad into the African financial market poses to yield a massive return for its customers and investors.

The lender, which is fast becoming a foremost Pan-African financial institution, currently has a presence in over 10 countries in the continent, giving it a 40 million customer base, making it Africa’s largest lender by customer base.

Access Bank has subsidiaries across Sub-Saharan Africa and Europe, providing financial and banking services. The Bank’s subsidiaries include Access Bank (Gambia) Limited, Access Bank (Sierra Leone) Limited, Access Bank (Zambia) Limited, Access Bank (UK) Limited, Access Bank (Ghana) Limited, Access Bank (D.R. Congo), Access Bank (Rwanda) Limited, Access Bank (Guinea) Limited, Access Bank (Kenya) Limited and Access Bank (Mozambique) Limited.

The Bank also has representative offices in China, Lebanon, India and United Arab Emirate (UAE).

Access Bank remains well-positioned to maximize opportunities, given its significant traction in Nigeria, across Africa and the world at large.

The financial institution proactively developed effective and timely strategies to ensure zero disruption in the delivery of service to all stakeholders despite the impact of COVID-19 in the preceding year.

Last year, the Bank relied heavily on its robust technology (digital platforms) to deliver uninterrupted services to customers in addition it continued its African expansion project, though cautiously.

Specifically, Access Bank in 2020 spent N18.74billion on Information Technology (IT) and e-business expenses as against N9.77billion reported in 2019.

As of 2020, Access Bank has about 3,000 Automated Teller Machines (ATMs), about 9.5 million new digital banking applications, 53,000 points of sale equipment, coupled with Unstructured Supplementary Service, (USSD), that has about 9 million customers, 633 branches and about 46,000 agents.

The figure keeps increasing by the day and shows the sheer scale of digital footprint following more acquisition in Africa.

This is in addition to the Bank’s existing commitment to sustainable business practices and demonstration of its ability to re-engineer the face of Africa by engaging in transactions, processes and partnerships that enable future generations to meet their needs.

The bank’s digital vision is – To be the clear-cut digital leader in Africa even as it moves closer to becoming Africa’s Payment Gateway to the World.

Access Bank has acquired six lenders across the African continent in the last five years.

The latest being the completion of the acquisition of completion of all regulatory procedures on Grobank Limited that was eventually renamed Access Bank South Africa Limited in May 2021.

Africa with a population of about 1.3 billion and of course rounding up to 1.4 billion by 2023 with Nigeria, one of the most populous if not the most populous country on the continent with a current population of about 206 million people.

For Ghana, rising from 30 million people to 32 million people by 2022 and of course, South Africa with an estimated 62.4 million population by 2023.

It is obvious that Gross Domestic Product (GDP) growth rates, has been tempered by the COVID-19 pandemic but it is expected that by 2023 overall growth rate in the continent should be about 4.3per cent.

For Nigeria, it is expected to be 3.8per cent and the National Bureau of Statistics (NBS) reporting 0.51 per cent GDP for the first quarter (Q1) of 2021.

Nigeria’s largest retail bank has been deliberate in its push for the continental market amid domestic and foreign challenges, having it clearly stated in its strategic five-year plan (2018-2022).

 “We are building the scale necessary to compete effectively and efficiently in key African markets outside Nigeria and ensure we sustainably deliver a strong return on invested capital in our Africa expansion.

“Scale is an important contributor to returns, and this transaction is consistent with our rigorous efforts to create a strong presence with scale across Africa, and in line with our vision to be World’s Most Respected African Bank,” Herbert Wigwe, CEO, Access Bank, said when the completed Mozambique’s African Banking Corporation acquisition.

Certainly, this strategic move by Access Bank will enable it to continue to support its stakeholders and pave way for growth opportunities both in the short and long term across countries in which it is operating.

However, Nigeria remains Access Bank primary market, a significant role that continued to play a critical role in the group’s growth and by definition Africa is the continent through which the bank can do business.

According to 2020 audited results for the period ended December 31, the bank’s profit before tax in Nigeria contributed 71.6 per cent or N90.2billion of the N125.9billion.

The Rest of Africa contributed 22.59 per cent or N28.46billion out of N125.9billion profit before tax reported in 2020 while contributed 5.77 per cent or N7.3billion in 2020.

According to Wigwe, “The subsidiaries’ contribution to the group performance stood at 28per cent year on year, recording total subsidiaries profit before tax of N35.7 billion.

“UK and Ghana, of course, accounted for 86per cent of the total profit before tax for subsidiaries with a return on average equity of five per cent and 27per cent respectively.”

The above indicated that it is extremely important as a growing institution to entrench a mixture performance just like other institutions that have followed the same strategy in developed markets and make ensure extremely strong home base performance to drive growth for investors.

Wigwe in a presentation to investors/ analysts said, “So Nigeria and Africa remain extremely important to us not just because we’re from here but also because of the skill which is available and the opportunities that we see.

“And of course, to ensure that there is a proper balance we will also need to have a reasonable presence outside of Africa to ensure both earnings and capital preservation given the stronger currencies we have outside of the continent.”

He explained further that, “Speaking to synergies realised from the merger, at the beginning of the exercise we had proposed merger synergies of N153.9 billion over three years comprising N99.4 billion and N54.5 billion in revenue and cost synergies respectively.

“Thus far we have achieved total synergies of N133.4 billion accounting for 87per cent of the total synergies proposed.

“This is two years into the merger. In terms of the balance sheet, we have continued to grow and improve on our deposit mix with low-cost deposit mobilisation.

“Customer deposits as of 31st December 2020 closed at N5.59 trillion, which is a 31per cent year to date growth from N4.26 trillion in December 2019.

“The growth was primarily driven by a 46per cent year to date increase in our CASA deposits, so basically our current and savings accounts and this reflects our enhanced retail presence leveraging on an innovative digital platform.

“We have continued to grow our low-cost deposits while replacing and repricing the expensive funds in the books. Total savings account deposits closed at N1.31 trillion at the end of the year, recording a growth of 66per cent.

“Subsidiary customer deposits also totalled about N754.7 billion, and that accounted for about 14 per cent of the total group deposits with the main contributors being Ghana and the UK.”

The Bank has continued to sustain its stronger performance in assets, much larger than any other bank in the context of Africa.

Access Bank in 2020 financial year reported total assets of N8.68trillion, a 22 per cent increase over N7.14trillion reported in 2019.  The bank’s total assets continued to grow after the acquisition of Diamond Bank Plc in 2019.

The bank’s strong financial performance is traceable to its global recognition. The risk ratings continue to show strong performance and an institution that is poised to remain for a very long time and get much stronger and diversify not just across the continent but other parts of the world.

Access Bank stakeholders position on expansion

The National Coordinator Emeritus, Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu, expressed that the management’s decision to expand across Africa is meant for the beneficiary of shareholders.

“The power to make the decision on behalf of shareholders rest on the directors of Access Bank. We want to believe the directors that the expansion will bring value to shareholders. They must have a clear sense of responsibility in achieving what the management aims at.

“My point is that it will be of interest of shareholders that the bank becomes a pan-African bank they wanted to be.

“Access bank has gone beyond a pan-African bank as they operate in other continents and shareholders expected the management to grow the bank to becoming Africa’s Payment Gateway to the World.”

Analyst at PAC Holdings, Mr Wole Adeyeye stated that “The vision of Access Bank is to be the world’s most respected African bank, and the bank is already working in that direction by expanding and acquiring banks in Africa.

“We expect the expansion of Access Bank in Africa to improve its revenue, the assets and shareholders’ funds, thereby increasing the wealth of shareholders.

“In addition, the expansion may likely lead to improved dividend payment for shareholders as we expect the banks outside Nigeria to increase their contributions to Group’s revenue going forward.

“Also, we expect the expansion of Access Bank in Africa to increase the bank’s contribution to Financial Services sector, thereby contributing positively to the GDP of Nigeria.”

Outlook for 2021

According to Wigwe, “On the outlook for financial targets for 2021, we remain committed to driving efficient and sustainable business growth by sustained efforts to improve our asset quality, to increase transaction income by migrating our customers to alternative channels and creating strong awareness for our flagship retail products.

“We will continue the drive to ensure low-cost deposits that will reduce our funding cost, thereby enhancing our liquidity and margins. We will enhance productivity across all our branches and extract value from our existing accounts. We will reduce operating cost by aggressively executing cost-saving initiatives and of course continuing to drive our merger synergies across the respective segments.

“Because of the current reality, we have revised our initial financial 2021 guidance as follows. Our expectation for 2021 is that we will achieve a return on equity above 20per cent, cost of risk less than 1.5per cent, our NPL ratio will be less than five per cent, the cost to income ratio less than 60per cent, net interest margin will be more than five per cent, our cost of funds will be less than 2.5per cent, our capital adequacy ratio greater than 20per cent, loan to deposit ratio about 65per cent, and our liquidity ratio greater than 50per cent.

“Despite the continued overhang from COVID-19 and the economic downturn we expect to see materially better results in 2021 compared to 2020.

“We believe that the strength of our balance sheet and our growing retail base provides us the significant or substantial runway to help mitigate the risks related to COVID-19 as well as accelerate the development and generation of sustainable revenue.”

 

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