Race for Africa’s retail banking dominance hots up with Access Bank in East, S’Africa

race for africas retail banking dominance hots up with access bank in east safrica

By Henry Uche

Several years ago when Mr Aigboje Aig- Imoukhuede, the managing director and his partner and deputy managing director Mr Herbert Wigwe, told a crowded news conference in Lagos that Access Bank Plc was targeting a listing among the first five banks in the country in less than ten years, many would have dismissed that philosophical statement as an adventurous taken too far considering the firm grip of the boys on the industry then.

That feeling could also have been defended given that as at then, Access Bank was not even among the first ten banks in Nigeria.

But the management had given their word, backed by clear roadmap that included a combination of organic growth and by mergers and acquisitions.

It was therefore not surprising that its merger with Diamond Bank Plc in early 2019, saw that vision of wanting “to be the world’s most respected African bank” becoming even clearer and more realistic than when it was first conceptualised.

Indeed with that merger fully consummated, Access Bank became one of Africa’s largest retail lenders by retail customer base with over 900,000 shareholders including local and International Institutional Investors.

Available statistics also confirms that with 36 million customers across 600 branches and outlets spanning three continents and 12 countries there might be no stopping the bank from becoming the largest bank in Nigeria and Africa’s leading bank by customer base.

With Herbert Wigwe now at the helm of affairs, Access Bank appears set to stop at nothing than getting to the top through consolidating on milestones already attained, while setting new ground rules that would help it capture bigger niche markets in Africa and across the globe.

For its enigmatic managers at Oniru Drive, Victoria Island, Lagos, nothing short of taking “retail banking services made in Nigeria” to the doorsteps of at least 22 commercial centres in Africa and beyond would pass as a landmark under the current roadmap and there is no letting up in that drive.

That drive perhaps underscores the relevance of its two recent acquisitions in Grobank of South Africa after taken over Kenya’s Transnational Bank in July last year and Zambia-based Cavmont Bank in January, 2021.

Under the dispensation, Access Bank enjoys a reputation of being Africa’s most successful banking growth trajectory in the last 12 years as demonstrated by its latest financial performance and strategies which seek to dominate the continental retail space in the near future.

For instance, in the financial year ended December 31, 2020, and amid the economic dampness engendered by the COVID-19 pandemic, Access Bank posted a gross earnings of N764.7 billion, representing a growth of 15 per cent over N666.8 billion in 2019, with Interest and non-interest income contributing 64 per cent and 36 per cent of revenue respectively. Profit before tax (PBT) also rose 13 per cent to N125.9 billion, from N111.9 billion in 2019, while profit after tax (PAT) surged from N94.1 billion to N106 billion on the back of a 32 per cent growth in operating income thus offsetting the rise in impairment charges and operating expenses, although the bank’s impairment charges rose to N62.893 billion, as against N20.189 billion in 2019.

But it explained that the net impairment charge of nearly N43 billion arose principally from a Structured Trade Finance(STF) portfolio in the Access Bank UK, adding that the STF impairment was one-off/COVID related and recoverable over the next 12-18 months against insurance cover from some world class insurers.

However, with an enhanced bottom-line, the board promptly recommended a final dividend of 55 kobo per share to raise total dividend payout to 80 kobo per share for the year under review.

Under the current expansion and growth trajectory, management believes that return on shareholder investment would increase over the next few years when the impact of its recent acquisitions begins to reflect on Group bottom line.

According to Wigwe, Access Bank Plc recorded a consistent growth in its retail banking business, reporting a 5.8 million growth in customer sign-on during the year through its financial inclusion efforts.

“This increase in customer base led to a retail revenue of N177.2 billion, a 64.4 per cent increase from its 2019 figures of N107.8 billion. The bank’s customer deposits also grew by 31 per cent to N5.59 trillion in December 2020 with savings account deposits standing at N1.31trillion. Similarly, net loans and advances grew by 18 per cent to N3.61 trillion in comparison to 2019 figures of N3.06 trillion,” Wigwe said.

The Access Bank Chief, also noted that with heightened recovery efforts across asset classes, there were significant write off leveraging its robust risk management practices, to enhance asset quality to 4.3 per cent compared to its 2019 report of 5.8 per cent. He further stated that he expects the trend to continue downwards as the bank strives to surpass the standard it had built in the industry prior to the merger with Diamond Bank

Mr. Herbert Wigwe, said the bank’s resilience in the face daunting challenges was indicative of the effectiveness of its management strategy and capacity to generate sustainable revenue.

“The strategic actions that the bank has taken over the past 12 months are evidence of a strong focus on retail banking and financial inclusion, an African expansion strategy and a drive for scale for sustainable value creation. In 2020, Access Bank proudly opened its doors for business in Kenya and Mozambique, further increasing our footprints across the African Continent. Access Bank Zambia also concluded the acquisition of Cavmont Bank Limited in January 2021 and the group recently announced the approval by relevant regulatory authorities for the acquisition of Grobank Limited, creating an inroad into the South African market in realisation of the group’s strategic ambitions,” he said.

Wigwe had said that going into the fourth year of the bank’s 5-year cyclical strategy, the focus remained on consolidating its retail momentum and expanding the African footprint in a sustainable manner. The Access Bank boss explained that the lender recorded a consistent growth in its retail banking business, reporting a 5.8 million growth in customer sign-on during the year through its financial inclusion efforts.

“This increase in customer base led to a retail revenue of N177.2 billion, a 64.4 per cent increase from its 2019 figures of N107.8 billion. The bank’s customer deposits also grew by 31 per cent to N5.59 trillion in December 2020 with savings account deposits standing at N1.31trillion. Similarly, net loans and advances grew by 18 per cent to N3.61 trillion in comparison to 2019 figures of N3.06 trillion,” he said. With respect to its non performing loan stock, Wigwe said the bank had intensified recovery efforts, undertook significant write off and leveraged its robust risk management practices, its asset quality improved to 4.3 per cent compared to its 2019 report of 5.8 per cent, noting that 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.

Meanwhile despite Nigeria’s challenging operating environment, he admitted that Access Bank delivered strong results in the first quarter (Q1) ended March 31, 2021 with the gross earnings printing at N222.1 billion was recorded, up by six per cent above the figures posted in the corresponding period of 2020. PBT rose by 30 per cent to N60.1 billion, from N46.2 billion, while Profit After Tax (PAT) grew by 28 per cent to N52.6 billion compared with N40.9 billion in 2020 on the back of a 13 per cent growth in operating Income and a 16 per cent reduction in interest expense.

According to Wigwe, the performance showed its strong capacity of the business to generate sustainable earnings on the strength of the balance sheet, through diverse revenue streams and its dedicated people.

“As a result of effective implementation of our cost reduction strategy, operating expenses remained flat, despite the inflationary environment and increased regulatory cost. Our retail banking business also showed steady growth with a 112 per cent increase in revenue to N57.5 billion and a 941,631 new customer sign-on via our financial inclusion drive during the quarter. This improvement is evidenced by the consistent and robust savings account growth to N1.3 trillion, leading to a significant reduction in our cost of funds,” he said.

He said the increased adoption of digital channels and the growing customer base, the bank recorded a 29 per cent growth in USSD transaction value and 40 per cent increase in mobile and internet banking transaction value.

“In line with our risk appetite and efficient risk management, our asset quality continued to improve as guided with NPL Ratio of4.0 per cent (Dec. 2020 4.3 per cent), as we intensified our recovery efforts. Likewise, we expanded our loan portfolio cautiously as reflected by the marginal growth in our net loans and advances to N3.65 trillion year-to-date (Dec 2020: N3.61trillion).Furthermore, we maintained robust capital and liquidity positions, well above regulatory levels with a Capital Adequacy Ratio of 22.2 per cent and a liquidity ratio of 48.3 per cent, positioning us to support our customers across various markets and adequately execute our expansion strategy,” he added.

Wigwe stated that in furtherance of their vision to be the World’s most respected African bank and Africa’s payment gateway, they remain committed to a disciplined and thoughtful expansion strategy.

With the current growth rate Wigwe at the annual general meeting (AGM) recently, assured shareholders of sustained healthy dividend payout as the bank appears well positioned to achieve significant growth in profitability and pay higher dividend and urged shareholders to expect higher returns  on their investment in line with the various strategies put in place to grow the business.

He said Access Bank is best positioned to maximise the identified opportunities in Africa on the back of a growing customer base and move towards cashless economy.

“We have identified Africa to be a vast pool of opportunities with over 370 million unbanked adults, US$9.2 billion in remittances and cross border payments, 89 cities of over 1.3 billion inhabitants by 2025 and the overall African financial ecosystem. We also see opportunities coming from the new African Continental Free Trade Area (AfCFTA), as it is expected to expand intra-Africa trade to 53 per cent by 2022, eliminate tariff on qualifying trade and increase financial flows,” he said. On the Nigerian economy, the bank chief expressed optimism that the economy presents enormous opportunities due to its large population, huge payments and remittance flows, and an emerging insurance market. “To capture these opportunities, Access Bank will transition into a holding company structure that will enable it tap into the market opportunities that are available in the regulated banking and consumer lending market, electronic payments industry and retail insurance market. Through the restructuring, we will create new product revenues without taking incremental risks for the enterprise, ensure diversification of earnings, and support outside of Africa,” he said.

According to him, the series of mergers and acquisitions undertaken since 2005 have all been value accretive, with green field operations in Mozambique and acquisition of Transnational Bank and Cavmont Bank in Kenya and Zambia respectively set to strengthen and increase bank’s market presence across Africa.

Only recently Access Bank formally acquired Grobank Limited of South Africa and renamed the bank Access Bank South Africa Limited. The deal was finalised after Access Bank’s acquisition of controlling shares in the former Grobank Limited, South Africa.

With this new development, Access Bank South Africa Limited is positioned to deliver a robust banking operation that connects key African markets.

The Chief Executive Officer of Grobank, Bennie van Rooy, said the acquisition was an extremely exciting day for the South African banking industry.

“Our corporate customers will now have increased access to trade finance, treasury, international payments and loans through the wider distribution network offered by Access Bank’s presence in the key trade corridors that connect Africa to the rest of the world. Banking with Access Bank South Africa means greater security as well as access to more products and services through a best-in-class digital platform, and a full retail banking suite will soon be on offer,” Rooy said.

Also commenting shortly after the transaction, Wigwe said the acquisition in South Africa has sealed Access Bank’s commitment to delivering strategic aspirations of becoming Africa’s Gateway to the World, in line with the vision to becoming world’s most respected African Bank.

“We look forward to the many opportunities our collective experience and deep understanding of the African market brings to our valued clients, and the journey ahead being one of great promise for our institution and the continent,” he said.

Speaking at the last annual general meeting of the bank in Lagos, Chairman of Access Bank Plc, Dr. Ajoritsedere Awosika, had observed  that in 2020, the bank made several investments to strengthen relationships with its customers in the year.

“By redefining our approach to customer service through streamlining our internal processes, and digitizing about 30 per cent of customer journeys, we were able to improve on our customer experience. Also, we were able to manage our expenses in line with the target for 2020 despite double digit inflation and overall cost of running the enlarged enterprise. As a result, we achieved a Cost-to-Income Ratio (CIR) of 63.4 per cent from 66.1 per cent in 2019. We worked hard to recover and dispose of a significant portion of our non-performing assets. With a decline in the portfolio of overdue loans, our asset quality improved across our retail and wholesale segments.

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