Business
Dream Merchants: Herbert Wigwe’s gambit to dominate banking in Africa
By OBINNA EZUGWU
From the beginning, it was evident that the chief drivers of Brand Access Bank Plc, Aigboje Aig-Imoukhuede and Herbert Wigwe were clearly not just going to lie down there and accept to play second fiddle. They had grooming. They had professionalism. They had grit. They had excellence. And they had ambition.
Leaving the comfort of their hitherto secure positions at GTBank, it was clear that their next venture was going to be quite strong. They took the bull by the horns. They founded Access Bank.
At its entry, Access Bank was one of the smaller players in the field. But that was not where they wanted to be. So the ‘Red Ocean’ came into play. They made pitches for bigger players. Afribank. Union Bank. Both forays were scuttled. But they grew thicker skins.
Their efforts were subsequently to pay off with Intercontinental Bank. It was by industry standards then a quite big catch. But even at that they were not done. Like the shark that has tasted blood, they waited for the next opportunity.
Now in a relatively classic case of what pundits describe as the ‘gradual escalation of audacity,’ a relatively more sure-footed Access Bank is raising the bar once again. Following its acquisition of Diamond Bank earlier in the year which helped to securely consolidate its place in Nigeria’s Deposit Money Banks, DMBs Tier 1 club, Access is now moving further afield: Africa, are you ready!
At the closing of its move on Diamond Bank earlier in the year, it threw a party to mark the occasion to which many distinguished guests were invited. One such notable guest was Africa’s richest man, Aliko Dangote. Handed the microphone to make some remarks at the event, his testimony was to the point: ‘from the time I have known the drivers of Access Bank; I have been in no doubt as to their capacity for dreaming up being dreams and following through on them.’ Coming from one who is also a big dreamer himself, Dangote’s attestation speaks volumes. The Access push is not casual.
Following on the Diamond acquisition, and very clearly with everyone now waiting to see what next Access Bank would do, it is not overly strange that the bank has presently reached out to take up space elsewhere; and this time in Kenya. But before then, it first had to fully digest the big Diamond animal it had swallowed
Putting Diamond to rest
The acquisition of Diamond was indeed a gambit. But the drivers of Access Bank had learnt from their earlier forays. And notably so, from their successful acquisition and integration of an equally big Intercontinental. So they opened the doors much wider this time around to make ample room for much.
Rather than the earlier experience with Intercontinental where quite a chunk of the existing staff of the acquired entity felt they had been shortchanged, this time around Access made extra moves to retain staff of Diamond even as they also reached out to shareholders and critical drivers of the acquired brand. Yes, this did not address all of the issues that naturally arise in the aftermath of transactions of this nature, but it surely made the din less noisome.
Beyond peace-building however, the drivers of Access Bank focused quite critically on sustaining the bottom-line. And it is here that they may have achieved what could be said to be the greater success, evidently.
Indeed, it’s some celebration time at Access Bank. Following on the heels of its merger with Diamond Bank earlier in the year, the bank has since gone on to post two quarters of fairly positive returns. For a merger exercise that some had surmised may have been over-sized, the outcome suggests that they have confirmed Dangote’s summation about the core drivers of Brand Access Bank Plc: they can dream and follow through big dreams.
But then the bigger fight for Africa is still in front of us all. The tall task of Conquering Africa. Can Access Bank do it?
At the moment, indications are that Access Bank is staying the course and as such even this ambition is on course. But the road is long. Last month, word filtered out about the Bank’s entry into Kenya. And with the market still trying to digest that, even more news followed: expect incursions into South Africa, Mozambique, Senegal, Angola and Cote d’Ivoire. The Access Bank train is still moving.
Nine months of strong earnings
In a sense, dreams stand a better chance of being realized when the resources to actualize them are available. This is the boost that Access Bank seems to have gotten from it’s recently released 3rd Quarter report for 2019. As has since been seen, Access Bank Plc’s nine months’ earnings came strong as analysts noted also that the actual performance was much better than what had been forecast in previous estimates. And more notably also, the results underscored the fact that some sizeable amount of post-integration stabilization had already taken place.
The Access Bank Group’s consideration for the merger with Diamond Bank earlier in the year had been put at N62.533 billion, out of which N46.767 billion was transferred into goodwill accounts; having made N8.975 billion fair value adjustment over Diamond Bank’s net assets acquired at a carrying value of N6.79 billion.
Significantly also, year to date, the group’s share price has increased in value. In the stock market, the Access Bank Group had a market capitalisation of N264.811 billion on shares outstanding of 35,545,225,622 units. Relatedly, the share price of the bank closed at N7.45 on Friday, indicating that the Access Group’s share price has increased 14.62% from the beginning of the year to date.
This smooth showing at a time like this simply suggests that Access Bank is one Tier-I bank that is in the money at the moment. Correspondingly, some other players with bulging balance sheets have had their share price depreciate by more than 20% on the average within the same period. Clearly, fortune continues to favour the brave!
Also in its nine months’ results, the group’s profit before tax significantly increased from N70.268 billion in 2018 (before the merger deal), to now hit N103.104 billion. What this means is that from its enlarged operational base, the new Access Bank has now pulled its weight by about 47%.
Among others, the group reflated its earnings through non-interest income sources like earnings from fees and commission, trading gains and other income items.
Access Bank group’s fee and commission income expanded by 53.68% from N43.527 billion in 2018 to N66.895 billion at the end of the first nine months span in financial year 2019.
Related expenses incurred along the line went up by 79%, from N6.067 billion to N10.885 billion. This left the group with a net value of N56.01 billion as against N37.46 billion in the comparable period in 2018.
Unlike in 2018 also, when the group recorded negative performance in foreign exchange transactions, in 2019, its net foreign exchange loss was reversed from -N29.579 billion and it now ended in N5.15 billion positive.
The group’s provisions however spiked, as it booked N83.53 billion as an impairment charge on credit losses having expanded by 27% to N10.61 billion.
The group also hit gross earnings of N513.655 billion at the end of 9 month in the financial year 2019. In the beginning of the year, the Access Group’s full year 2018 gross earning was N528.744 billion.
Quite notably also, Access Bank Group’s shareholders’ equity position jerked up by more than 25% from N490.511 billion at the beginning of the year to N614.84 billion at the end of the period.
The increase was driven by the merger under reference which reflected directly on the increase in its share capital and premium account, raising it from N212.438 billion earlier in the year to a new posting of N251.811 billion.
Also, retained earnings spiked by 47.06% from N155.592 billion to N228.826 billion, while other components of equity also increased by 10% from N114.609 billion to N126.111 billion in the same periods under reference.
On its part, total assets increased to N6.606 trillion from N4.954 trillion before the merger. This represents an increase of 33% year to date. An analysis of the report shows that a significant chunk of the expansion recorded in the bank’s asset base came from an uptick in loans and advances to customers.
Also, the value of pledged assets increased enough to expand total assets plus the fact that property and equipment similarly increased. Of critical note is the fact that assets classified as held for sale expanded by twice the amount carried forward into the year.
Deposits from customers grew massively enough – by as much as 65% – from N2.564 trillion to N4.239 trillion. This came just as interest-bearing borrowing spiked by 59.07% to N617.863 billion in the period, and up from N388.416 billion as had been the brought forward position as it walked into the merger deal.
On the flip side, the retirement benefits obligation of the enlarged Access Group went up as much as 30.31% between the periods under review; moving from N2.336 trillion to N3.044 trillion. You don’t win all, all of the time!
Addressing post-merger blues
Following the close of the merger with Diamond Bank however, two obvious challenges could be seen by the banking public. One was the seeming ‘oddity’ of having two branches of the same bank in such close proximity to each other, which no doubt was part of a broader decision to retain personnel of the old Diamond Bank, and through them their horde of customers. The second had to do with network integration issues that affected also, more notably, customers being incorporated into the Access Banking framework from the old Diamond Bank.
While the bank has over time tried to explain the situation and pacify its customers and service users, it last week took an extra step of announcing that customers would get one week of free instant transfer as ‘a compensatory move of gratitude.’
The move which also coincides with the end of a technology and infrastructure upgrade, the bank says, would now introduce a better ‘digitally-driven financial solutions that will make transactions simpler, faster, convenient and more secure.’
A statement from the bank outlines that ‘the free NIBSS-Instant-Payment (NIP) transfer offer runs from November 1 – 7, 2019 and is available on online banking, mobile banking app and *901# or *426#.’
Pan African ambitions
In the hope that it has much better addressed its Nigerian challenges, the Herbert Wigwe-led Access Bank has moved to acquire Kenya’s Transnational Bank, Kenya’s 36th largest bank in terms of assets, as part of a determined move to continue to cement its grand pan-African ambitions.
This came upon news that the Central Bank of Kenya (CBK) had granted leave to Access Bank at the close of October 2019 to, upon completion of the deal, take over 93.57% of the bank’s assets.
A tier-4 bank in the Eastern African nation, Transnational had posted a 58% jump in its quantum of non-performing loans to 1.85 billion Kenyan Shillings last year from the Kshs. 1.17 billion it had posted in the corresponding period in 2017.
In the same2018, Transnational Bank posted a total loss of 71.8 million Kenyan Shillings, a factor that did not deter the Red Ocean adepts at Access Bank, from seeing the brighter side potential of picking up a toehold in both the agricultural sector and East Africa’s largest economy.
In his remarks on the acquisition, Herbert Wigwe, CEO of Access Bank, said that the bank was ‘pushing ahead to create Africa’s biggest retail institution and a formidable global powerhouse.’
And just as the ink is drying up on that text, word has also come that some more African expansion action is already underway at Access Bank.
“By this time next year we would probably have added about four more subsidiaries, most of them Greenfield,” Wigwe was quoted as having said in an interview with Bloomberg last week.
With operations already running in Nigeria, Sierra Leone, Gambia, Ghana, Democratic Republic of Congo and Rwanda, some of the newly planned operations are expected to open in South Africa, Angola, Mozambique, Senegal, Liberia and Ivory Coast as part of a stream of operations that is planned to cover some 22 African nations.
Also notable is the fact that under the new dispensation, while some of the new operations would be subsidiaries, others are planned to be representative offices or partnerships.
Strategy for Africa
Now a shooting duck of sorts, unlike in its earlier years, much of what Access Bank had done with the advantage of surprise is no longer guaranteed. Today, almost everyone that is watching can see it coming. It is no more in the shadows. So it must heavily drive the strategy game.
Even as it pushes to drop sail firmly in its first outlined additional set of 15 countries, the eyes are out there peering to see how this would pan out while also noting that there are in all 55 nations in Africa.
And as it moves to push its game. Some of the initial concern to its jostle for competitive leverage on this plank is expected to come from the likes of UBA and Ecobank which already have operations in 19 and 33 African nations respectively at this time.
So is there a particular method to its expansion that would be comforting? Says Abdul Imoyo of the Bank’s Corporate Affairs Department, ‘We want to be Africa’s gateway to the world, such that many things coming to the continent would come through us. Overall, we are looking at countries that will add value, to complement our strategy. I cannot say specifically that we are going to this or that country next.’
The competition out there
Commentators however say that laudable as its drive is, the quest to dominate the African banking landscape is not going to be a walk in the park on account of the presence of well-heeled competitors.
But should Access even be able to ride stronger into the West and Central African field, the real icons that it would have to navigate seem to be elsewhere: the drivers from East, North and Southern Africa.
The strategists at Access seem to appreciate this as it is already looking at cracking the tough South African pot with a planned foray there in the next year. But there is no talk yet of North Africa which given its Arab and Middle Eastern linkages is clearly an entirely different kettle of fish.
At this point, we are reminded of what the sages say about how to eat an elephant: ‘one piece at a time.’ So we turn to the elders for counsel.
Chief Emma Nwosu, astute businessman, consultant and a former Managing Director of the defunct African Continental Bank, ACB believes that though gargantuan, the Access Bank team can pull off the challenge. But then he counsels a very high dose of realism:
‘From where I stand now, they may not really have all that it takes to conquer all of Africa now. But as the bank goes along, it can acquire more of what it takes to achieve that. It boils down to strategy. If they have solid strategy they can achieve that ambition.
Overall though, Access Bank has done quite well. Of course you can see that it is the most profitable bank in the country now. Therefore its ambition to be the biggest bank in the continent can be said to be an ordinate one. It is not inordinate.
It is possible that they already know what others do not know. They have succeeded with the few acquisitions that they have made already and being an also youthful bank, they still have a lot of energy. However, they should pace their moves.’
Hurdles on their way
But then what are the practical challenges on the way?
One of the challenges that Access has to address is that of getting sufficient support from its home base. Given the geo-political dimensions of doing business at this level, it is apparent that the bank would require and need all of the support it can from the Nigerian authorities, at least on the policy plain.
The challenge here is that with the Nigerian authorities at the moment running a clearly insular and protectionist economic regime, the first line reflex would not be to support expansionary initiatives as the Access Bank pitch for continental dominance. But then a way can be found – at least at the symbolic level – even as the Bank’s strategists need to live and work within the reality that all things considered they are essentially on their own.
Indeed, it is at the level of the geo-political that things tend to become even more interesting.
This is more so when these developments are taking place in the season of the coming into effect of the African Continental Free Trade Agreement. Riding on the cusp of the build-up to AfCFTA, one of Kenya’s biggest banking chains, Equity Bank, has now moved to set up shop in Africa’s second most populous nation, Ethiopia. Access Bank’s entry into Kenya at this time may also be helped by AfCFTA.
Indeed, the analyst Thomas Eze, hazards that rather than trying to cover all of Africa geographically, his suspicion is that ‘Access Bank is more interested in the fast growing economies of East and Central Africa.’ And that would make business sense.
Indeed geo-political considerations are why Eze says that he is not expecting much action from Access in South Africa itself at the moment.
‘South Africa is not a clever option at the moment as the economy is still sluggish (a root cause of the so called xenophobia) and the recent move by Lafarge-WAPCO to sell back the South Africa operations to the Group, demonstrates the underlying weakness of business in South Africa. Of course the challenge tends to position the likes of Dangote Cement to take over South Africa’s largest cement company, but it also plays up the perceived animosity of South Africans to other Africans setting up businesses in their economy, no matter how unreasonable that attitude seems to be, given the country’s over 57% youth unemployment. But then politics and emotions many times contend with logic and common sense, right?’
Beyond politics however and the associated concern over the potential negative spin-offs from actions taken or not taken by political actors such as border closures and xenophobia, Eze says that the options open to the Access Bank expansion drivers however remain chiefly economic:
‘The issue is more a matter of private sector assessment of potential operating and equity returns on transcontinental investments. The Nigerian border closure perhaps affects Benin Republic, Togo, Niger, Cameroon and Cote d’Ivoire more than other economies of CESA, Central, East and Southern Africa. The Nigerian firms do not need local government support, except for banks that require a certificate of “No Objection” from the CBN to invest in banks outside Nigeria.’
Indeed, Eze may be right as broken down and in spite of the challenges faced on the political front; early bird drivers in the pan-African business arena like Dangote Cement and UBA have been grossing considerable returns from their African operations.
On his part, Alan Akamu says that Access would need to look out carefully so that it does not get caught up in what he believes to be some of the pitfalls that may have plagued one of the earliest entrants into the space that it is moving in to occupy:
‘Now, it depends on what their focus would be. In this respect, I guess their biggest competitor would be Ecobank. Sadly, Ecobank has not quite lived up to the billing of being a truly ‘African bank’ for whatever reasons. One of which I think is the francophone Anglophone economic dichotomy. France has a jugular grip on all the francophone economies in Africa. So, what deliberate policies, programs and products as well as focus areas they embark on determine how far they will go in this respect.
Akamu sees Stanbic Bank and Citibank as two other contenders for the grand prize of leading pan-African bank but faults them on the basis of their essentially playing to niche strengths.
‘I believe have only being very strategic in their choice of where to invest in Africa have made them not to be truly African banks.’
For Wole Akaraogun, a Lagos-based banker (no staff of Access Bank), Access Bank has demonstrated very notable ‘outside the box thinking that has made them to become about the fastest growing bank in Nigeria in terms of PBT. Buying over Diamond Bank was another intelligent idea. I therefore trust the handlers of Access to do the best thing for the company. But if I am the CEO/MD of the bank, stronger ties with other leading banks in the eastern/ southern Africa sub-region would not be a bad business idea.’
