Pan-African Strategy: Access Bank sets to enter Republic of Cameroon.

As part the group strategy to increase Pan-African footprints, Access Bank said it has received approval from the regulators to expand its banking operation into the Republic of Cameroon.

The group had revealed that as part of its African growth strategy, it will open four Greenfield subsidiaries in African countries in 2020.

Then, in a notice, the group notified the Nigerian Stock Exchange that it has obtained approval from the Central Bank of Nigeria to its proposed expansion into the Republic of Cameroon through the setting up of the bank subsidiary.

However, it stated that the proposed expansion is subjected to approvals of the regulatory authorities in the host country in the pursuant of the Bank’s strategic objective to become Africa’s gateway to the world.

“We are currently awaiting regulatory approvals and we will provide the market with updates in due course”, the management stated.

Speaking at the earnings call with analysts in 2019, the Group Managing Director and Chief Executive Officer Herbert Wigwe said: “By this time next year, we would have added about four more subsidiaries, most of them Greenfield actually to our list of African subsidiaries”.

While addressing issues with capital given its recent acquisition, he said: “We have a very rigorous and disciplined capital plan. Our existing instrument matures in 2021 and we are careful as to what’s going to the market, in terms of the cost of funds for the institution”.

The GMD said Access group in under no pressure. “We are able to meet the material obligations of Diamond Bank, prepaid last maturing Eurobonds and able to meet all foreign currency demands of our clients”, he added.

At the end of first 9-month in 2019, the capital adequacy ratio of the bank stood at about 20.3% on a full impact basis.

“When we consider the regulatory transition arrangements, the capital adequacy ratio is sitting at about 23.9%, the Bank Chief said.

Access Bank Plc earnings release showed that gross earnings grew by 37% to N513.7 billion in the period compared to N375.2 billion in the corresponding period. This comprised 79% of interest income and 21% of non-interest income.

Its interest income was up 48% to N405 billion as it recorded 115% increase in income from investment securities, which was N140.4 billion in the period compared to N65.2 billion in the corresponding period of 2018.

It records showed a 75% increase in interest on cash and cash equivalents to about N8.6 billion; 25% increase in interest on loans and advances to N256 billion compared to N204 billion in the corresponding period of 2018, owing to growth in the loan book as a result of the recent merger.

Interest expense surged 29% to N104.8 billion compared to N151 billion; driven by the share side of the deposit base resulting from the merger and the interest expense on structured funding in both local and foreign currencies.

Wigwe said Access is gradually repricing the book, which has started to reflect in cost of funds, evidenced by 40 basis points reduction to 5.2% in the current period, when compared to 5.6% in September 2018.

Access Plc recorded 54% increase in commissions and fees to N66.9 billion as of the 9-month 2019 from N43.5 billion in 2018. This came as a result of significant increase in retail and e-business fees.

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Wigwe said: “We also saw a significant increase from other operating income, comprising income from financial services as well as a N22.4 billion recovery from resale of bad loans.

“This is one of the key synergies of the merger. We have already surpassed the target that we set for ourselves, and we hope to achieve a lot more in the last quarter of the year”.

In his review, Wigwe stated that on a quarter-on-quarter, we saw a growth in trading income due to strategic position we took to take advantage of the yield volatility on fixed income. The FX gain is from the volatility and timing of income recognition of derivatives.

However, due to merger, loans and advances grew to about N2.9 trillion compared to N2.1 trillion in the corresponding period. NPL ratio settled at 6.3% in the period compared to 6.4% as of half year.

The GMD said: “Key factors responsible for this remain our oil and gas service, which was about 44.3% of the ratio; general commerce, 11.2%; and then oil and gas upstream, 10.6%.

Meanwhile, customer deposits closed at N4.2 trillion, up 65% from N2.6 trillion in the corresponding period of last year, jumping 1.3% from June 2019.

Wigwe said: “In the next couple of months, Access Bank will start rolling out some practical, cheaper and eco-friendly outlets in specific neighborhoods”.

“…where you have limited banking penetration, but with demographics and economic requirements that can basically ensure that those outlets break even and make money”.

The management revealed that its retail loan portfolios have grown significantly as Access is doing an average of about N1 billion a day in loan disbursements through Payday Loan and other products such as Salary Advance, Small Ticket Personal Loans and Device Financing.

Wigwe said: “It’s being done in a risk-managed manner to ensure that we don’t see significant increase as far as our NPL ratio is concerned.

“Of course, our very strong analytics is going towards ensuring that behaviors are monitored, collections are monitored on a daily basis, not just on a portfolio basis”.

“We’ll continue to concentrate on the added gains of the merger. We have realized so far about N58 billion from the synergies, which includes N22 billion from recoveries, N4.7 billion from sale of assets, and a bit more from IT integration and data consolidation.

“We’re extremely proud to have completed our integration process with respect to IT. So what that means is that all systems, Access and what used to be Diamond, have been fully and completely integrated”, the GMD added.

Speaking on Kenyan acquisition, Wigwe said: “We’re very clear that we wanted to create what would be Africa’s gateway to the world. With respect to Kenya specifically, the country represents one of the major trade corridors in the continent”.

By Sam Atanbiyi, Gbenga Anisere