By Henry Uche
Barely four months into the implementation of the African Continental Free Trade Area agreement, Nigeria’s leading financial services provider, Access Bank has indicated its readiness to turn the country into a vibrant retail hub to enable businesses across the country get a fair chunk of an estimated $4trillion available in the nascent economic bloc.
To this end the bank said it intends to drive revenue growth through retail expansion and a stronger focus on consumer lending, payments and remittances, as well as customer acquisition at an incredible pace.
This latest strategic move stems from management’s realisation that achieving revenue growth in an earnings-constrained and ever-increasing competitive environment remains would remain a major challenge for traditional banks globally in the unfolding economic dispensation.
With the outbreak of the COVID-19 pandemic, it is becoming rather obvious that opportunities for low hanging fruits for most lenders are narrowing a lot further, particularly with increasing incursion of financial technology (fintech) players into the payment and credit space.
Going by a recent report by Deloitte, a global professional services firm, as low interest rate regime and new regulations continue to strangle traditional sources of risk-based and fee income, several once-attractive customer relationships are generating less revenue, causing some to become unprofitable.
It is therefore not surprising that many bank executives are now discovering that the old tried-and-true strategies for organic market share and revenue growth are no longer sufficient for present day realities.
Consequently, they are now constrained to deepen their retail banking strategies and fine-tuning their products to be able to compete in the remaining attractive opportunities.
For Access Bank PLC, this seems to be story driving it’s recent numbers in the midst of the pandemic.
Over the last one year for instance, the bank’s consumer lending business has seen 60 per cent growth in digital lending volume and value.
During the period under review, Access Bank continued driving its revenue growth through retail expansion, which has grown consistently across all income lines, with strong focus on consumer lending, payments and remittances, digitalisation of customer journeys, and customer acquisition.
It also maintained strong capital levels in addition to investing for growth with accumulated capital over time.
Under a professional management team led by Mr Herbert Wigwe, Access Bank is undaunted in its commitment to resolve outstanding legacy debts which runs into billions of naira from recalcitrant debtors of former Diamond Bank Plc which it acquired on April 1, 2019.
On this front, the bank is currently locked in a legal battle with Seplat its allied company, Cardinal Drilling Services over an $85 million loan.
There are other high profile debtors that are not happy with the bank’s to recover the debts and who are fighting back. But that has not deterred the leadership of the bank to remain focused on recovering the debts.
Meanwhile 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, Access bank recorded gross earnings of N764.7 billion for the financial year which represents a 15 per cent improvement from the N666.75 billion posted in 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
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.
According to Wigwe, the Group Managing Director and CEO of Access Bank, the financial institution’s resilient performance was a testament to the effectiveness of its strategy and capacity to generate sustainable revenue.
“The strategic actions that the Bank has taken over the past 12 months evidence 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 realization of the Group’s strategic ambitions,” he added.
However, in line with opportunities that exist in the market, Access Bank recently disclosed plan to transit into a holding company (HoldCo) structure, having received an Approval-In-Principle from the Central Bank of Nigeria for its restructuring. When fully implemented, the HoldCo will consist of four subsidiaries that will enable it tap into available market opportunities in the consumer lending market, electronic payments industry and retail insurance market.
Access Bank Group will also consist of Nigerian, African and international subsidiaries, while the payments subsidiary will leverage the bank’s strong suite of assets, according to the GMD.
“Going into the 4th of our 5-year cyclical strategy, our focus remains on consolidating our retail momentum and expanding our African footprint in a sustainable manner,” Wigwe said.
In 2018, Access 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 consumers new products. A good strategy to drive that campaign came by way of 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.
Beyond such partnerships, Access Bank has also embraced digital technology to propel both its sustainability targets and the African gateway strategic drive. This was further demonstrated in its partnership with the Africa Fintech Foundry (AFF), aimed at nurturing the next generation of cutting-edge financial-technology firms.
The AFF is a pan-African accelerator designed to find and invest in start-ups implementing a global viewpoint, while still focusing product offerings on Africa. Access Bank says plans to harness the very best Nigeria has to offer, working closely with them to make Nigeria a retail banking powerhouse.
But despite these retail and networking alliances, one of the bank’s unique selling points lies in its consistent innovation with new products and services that support digital payments across Africa.
Access Bank recently unfolded plans to expand to eight 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).
In its initial foray, countries like Morocco, Algeria, Egypt, Ivory Coast, Senegal, Angola, Namibia and Ethiopia have been lined up for inclusion into its offshore network of branches and subsidiaries to increase its presence from 12 to 20 countries of the world.
According to Wigwe, across Africa, there are opportunities 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.
Wigwe said the bank would use its London office to expand representative offices in India, Lebanon and China.
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 Africa.
“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.” Wigwe said
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 into, 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 on opportunities Nigeria stands to derive from AfCFTA, he said the bank would use its digital framework to benefit from the deal.
“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 Access Bank CEO said.
Enhancing Customer Experience
However, as part of its commitment to increase access to banking services in communities across the country, Access Bank recently announced plans to open 10 ‘Access CLOSA’ outlets in six cities in Nigeria. The CLOSA branches are Access Bank’s Branded Cabins situated in metropolitan areas offering banking services to customers.
The bank described the move as a timely intervention to mitigate the effect of restrictions caused by the COVID-19 pandemic.