One year after its merger with Diamond Bank, Access Bank’s results validate the big lender’s foresight, writes Fisayo Osindeinde. On December 19 2018, the announcement that Access and Diamond Bank had signed a Memorandum of Agreement in respect of a potential merger between both banks sent shockwaves around the entire country. The two banks, powerhouses in their own right, would now merge to become one juggernaut. It wasn’t all that simple though.
This announcement raised a wide range of questions. Would the CBN and SEC ratify the merger? How would the Banks be able to manage a clash in cultures? How would the loan books of both banks be managed? What would happen to sister branches in proximity with one another? How would the leadership of the new brand be formed?
Back story
Before the merger announcement, Diamond Bank had faced the possible revocation of its license due to its nonperforming loans of over N150billion and the resignation of three of its directors and the chairman of the board of directors. With the merger with Access Bank, however, it would be able to prevent this occurrence. This shrewd move prevented Diamond Bank from facing the same reality as Skye Bank Plc which had its license revoked in September 2018 due to the depletion of its capital base. The CBN subsequently injected about N786billion into the bank to shore up its liquidity and transferred the operations, assets and management of Skye Bank to Polaris Bank Limited, a bridge bank.
The Group Managing Director of Access Bank, Herbert Wigwe, was quick to address some of these issues, pointing out the fact that the merger would afford both banks the opportunity of leveraging on their distinct potentials to build a stronger bank. Diamond Bank was expected to benefit from Access Bank’s strong risk management culture and capital management expertise, while Access Bank stood to benefit from Diamond Bank’s substantial retail banking expertise and strong digital offering.
Wigwe’s sentiments were indeed right, as Access Bank is now Africa’s leading retail bank, with 36 million customers and over 35, 000 Point of Sale (POS) terminals.
In line with the Central Bank of Nigeria’s objective to foster a strong, competitive and reliable banking system, adequately equipped to deliver quality services to the economy, the merger birthed a foremost tier-1 bank with a capital base strong enough to vault it into the top 3 in the country. One year passed, and it has become clear that the merger has led to a healthy competition between Access Bank and other existing banks and this has, in turn, further strengthened the banking system.
Strength in numbers
Earlier in the year, Access Bank PLC released its audited full-year financial statement for 2019, highlighting significant improvements in most performance indicators. According to its published statement, the banking giant recorded an 11.8% increase in profit for the period under review.
The gross earnings as of December 31, 2019, stood at N666.75 billion as against the N528.74 billion which was recorded for the corresponding period for 2018, a laudable 26.10% increase.
The net interest income for full-year 2019 was N277.2 billion as against the N173.6 billion, which was recorded for the corresponding period in 2018, representing a sizeable increase of 59.7%. The Bank’s net fee and commission income for full-year 2019 stood at N74.05 billion as against the N52.5 billion for the corresponding period for 2018, again representing an impressive 41% increase.
2020 hasn’t been kind to businesses the world over. However, as the global economy scrambles to fill profit gaps created by COVID-19, Access Bank PLC reports that it has achieved N54.3 billion of the proposed N153.9 billion synergies for the year 2020. Remarkably, its 2020 profit-before-tax stood at N46.3billion, a 3% increase compared to the same period last year. This, however, is only surprising to those who haven’t been observing the Bank’s activities in the last few years, but most importantly, since its most recent merger with Diamond Bank.
Arguably the leading force in the Nigerian financial sector when it comes to harnessing the power of Mergers and Acquisitions (M&AS), Access Bank has not only been able to expand its reach but also designed business models that will propel it to the top of the African Banking food chain soon.
There is a reason for confidence
Pundits have not shied away from the reality that the impact of the COVID-19 pandemic on macro, social, and consumer behaviour is too pronounced to ignore. Access Bank has not done so either. The Bank has reaffirmed that it will remain committed to delivering innovative service offerings and strong value to its customers and stakeholders.
A feature that has kept Access Bank ahead in the industry is its improved integrated mobile banking platform which has been on-boarding old Diamond Bank customers onto the new unified mobile banking platform, Access More. The platform, with its convenient user interface, has made everyday banking easier for the millions of Bank customers using it.
Message to Thomas(es)
The COVID-19 pandemic is one that has created panic and cynicism among people in different spheres. Thus, it is only natural if the Bank’s stakeholders were to wonder whether this evident upward trend is any more than a mere blip, considering that the uncertainties of COVID-19 are likely to be around for at least the rest of the year. It is worth noting that this is not Access Bank’s first tussle with adversity.
Access Bank has weathered the economic uncertainties of Nigeria and the larger African continent over the years, maintaining its position as a leading force in the banking industry, through innovation in client solutions and a sustainable business model. That alone might not be a reason for confidence in the Bank’s ability to maintain its goals, but the uptick in the Bank’s share prices despite the country’s economic turmoil definitely is.
The present has given no reason to doubt that the future will be any less bright than Access Bank projects it will be. If anything, it invites a healthy curiosity that would leave room for the Bank to once again reiterate its resilience, business and market nous.
