One year after successfully consummating its business combination with the defunct Diamond Bank, Access Bank Plc is now adopting strategies that will enhance customer satisfaction and shareholders’ value, writes Goddy Egene
When Access Bank Plc held its 31st Annual General Meeting (AGM) in Lagos last month, the shareholders were very happy with the board, management and staff of the financial institution. The AGM was held by proxy, following the outbreak of the COVID-19, which necessitated social distancing protocol to avoid the spread of the pandemic.
Three leaders of shareholder associations stood in for other shareholders at the AGM. They included: Sir Sunny Nwosu of Independent Shareholders Association of Nigeria (ISAN), Mr. Owolabi Peters of Integrated Shareholders Association of Nigeria and Mrs. Bisi Bakare of Pragmatic Shareholders Association of Nigeria.
And obviously the shareholders were highly pleased and showered encomiums on board, management and staff. The first reason for their happiness was fact the decision to combine business with Diamond Bank Plc was a highly pragmatic and visionary one that has yielded significant value. Secondly, they saw a new head office that befits the status of the enlarged Access Bank Plc. Thirdly, they received a final dividend of N14.218 billion and given the business strategy unveiled by the bank, they are sure of better returns on investment going forward.
For instance, Nwosu said Access Bank Plc had a good foresight that saw it merge with defunct Diamond Bank Plc, noting that “the professional and seamless manner with the integration was done should be commended and shareholders appreciate the board and management.”
According to him, the future is very bright for the all shareholders considering the synergy the merger has brought to the bank and the expertise the management and staff is deploying the ensure Access Bank Plc maintain a leading role in the retail banking space.
He also commended the leading efforts of Access Bank Plc in the private sector lead Coalition Against COVID-19(CACOVID) in the supporting the Federal Government to fight the pandemic.
However, after the showering of praises on the board and management, the shareholders urged the bank to control its operating expenses. In his response, Group Managing Director of Access Bank Plc, Mr. Herbert Wigwe, said the high operating expenses resulted from the business combination with Diamond Bank, noting that it was a deliberate strategy to ensure the bank did not lose customers within the first year of the merger.
According to him, having successfully integrated the operations of the two banks, they are now addressing the operating expenses using various strategies.
Wigwe said: “One of the areas we need to address very seriously and you will see it going into the future is our operating expenses. And for last year, the big jump that you saw came as a result of the merger. We decided to try, for once, a different way of treating a merger. This merger was different because we were bringing a large retail infrastructure and we did not want to lose customers.
“We have seen it happen before, so we told ourselves, let us move with the large infrastructure and gradually see how to manage down the cost. When we did the first merger (with Intercontinental Bank) as successful as it was, we saw a deposit run. Now as today, our savings account is getting to one trillion Naira.”
“We could not afford to do anything that will upset the customer, so we made sure that there was no issue of staff going away. We made sure that branch closure was done a very systematic manner not to irritate the customers because it is a very competitive market. Imagine that we had to carry a staff strength of 30, 000 right through the year, this made our expenses to rise than normal. But we have seen our first quarter still high, but we have taken very drastic measures and you will see the results come through in second and third and fourth quarter,” he added.
According to Wigwe, “we know what to do when it comes to running our business and one thing we wanted to make sure that the benefit of this combination with Diamond Bank was going to be retained and successful.”
“As so we are not in mad rush to do what we would had typically done. So now, we are basically rationalising the branches, making all the adjustments necessary to ensure that you start seeing a steep reduction in cost as we move on particularly now that a global recession is staring us in the face. We are doing this to be sure that we manage our institution better,” the GMD said.
Although Access Bank Plc was already in the process of reducing cost after the successful merger with Diamond Bank, the COVID-19 pandemic has brought more burden on the bank, a development that led to apprehensions that 75 per cent of its workforce would be sacked.
However, the management of Access Bank denied any plan to sack its workers, saying it was a baseless speculation.
“This is malicious and a distraction from a genuine and compassionate plan to protect our staff and help keep jobs in the unfolding macroeconomic environment. We state that based on the impact of the COVID-19 pandemic, we do not expect that all our branches will be fully opened for in-branch services until later in the year. This has made it impossible for many of our outsourced workers to perform their duties as usual.
“Based on the above-mentioned circumstances, we have commenced engagement with various stakeholders with a view to ensuring that they provide the relevant services and optimum manpower as may be required by the bank on an on-going basis. As we navigate the new normal occasioned by the COVID-19 pandemic we wish to assure all our esteemed stakeholders that in our traditional manner the bank will continue to ensure that its actions and decisions are guided by fairness, justice, equity and good conscience,” the bank said.
Access Bank explained that it had only suspended operations in some branches following the directive by the CBN.
“At the onset of the COVID-19 pandemic lockdown, we suspended in-branch operations at different locations as directed by the CBN and in line with business continuity plans at vulnerable spots, whilst we continued to provide services through our alternative digital platforms. Beyond complying with the regulatory directive, this action was taken to ensure the health and safety of our customers and employees,” it said.
For one, the closure of any bank branches requires the approval of the CBN. But Access Bank has not applied nor obtained the approval of the apex for the closure of any of its branches as widely speculated. The bank has only suspended operations in some branches as directed by the CBN.
Yet industry analysts said Access Bank would not have committed any wrongs if it had chosen to lay off or furlough some of its workers in the context of the COVID-19 crisis.
“But it is not doing so. It had the opportunity to do so when it merged with the now-defunct Diamond Bank Plc. Big companies all over the world are feeling the heat wrought by COVID-19. To put things in proper context, more than three million Americans have filed unemployment claims a couple of days ago, bringing the total number of Americans who have sought government support since mid-March to 33 million,” an analyst said.
Meanwhile, according to the Bureau of Labor Statistics, the United States economy lost 20.5 million jobs in April, an unprecedented number since 1939. In March alone, employers slashed 870,000 jobs.
Gradually, a sour recollection of the great depression is springing up. The great depression was the worst economic downturn in the history of the industrialised world, that lasted from 1929 to 1939. When the economic depression reached its lowest point in 1933, about 15 million Americans were unemployed and nearly half the country’s banks had failed.
“There is nothing in a bank restructuring its workforce to meet with new challenges. It is a common practice all over the world, just as there is nothing wrong with an employee resigning his appointment to take up another job opportunity elsewhere. The leadership of Access Bank has been pretty transparent about their strategic direction and road-map to take them to their goal. I believe Wigwe must be commended for his achievements and transparency and quick thinking. It is the stuff that makes the difference between success and failure in leadership. It is no surprise therefore how within a short ,” time he has redefined the landscape of banking in the country.
And for anyone to come this far, he or she must be innovative, creative, forward looking and proactive. You can’t find Wigwe wanting on this frontthe analyst concluded.
Still speaking on the benefits of the merger, Wigwe said the combination of Diamond Bank’s strong retail customer franchise and leading digital platform with Access Bank’s corporate banking capabilities, proven risk management and capital management expertise has created a diversified financial institution with strong value creation potential.
“The combination has birthed the largest bank in Nigeria by customer base and total assets and the largest in Africa by customer base. This is a testimony to the ability of the bank to seamlessly execute its strategies. No doubt, a new vista is opened for the Bank by this strategic positioning as we continue to consolidate on this achievement and enhance our retail contribution to our profitability,” he said.
Wigwe said they seek to create sustainable value by developing the opportunities embedded in their operations which represent the most attractive options.
“This is in addition to our existing commitment to sustainable business practices and demonstration of our ability to re-engineer the face of Africa by engaging in transactions, processes and partnerships that enable future generations to meet their needs. The future is bright. Access Bank is stronger than ever before and ready to push the limits. With the emergence of the new entity, the bank is well- positioned to cater to the retail business through a broader reach and product offerings tailored to individual customer needs and delivered efficiently. The merger has resulted in the establishment of Access Bank as a tier one retail banking franchise with strong digital payments capabilities and benefiting from a diversified business mix,” he declared.
Just as the shareholders expected, the first quarter results of Access Bank ended March 31, 2020, points to a brighter future. Gross earnings rose to N211.12 billion in Q1 of 2020, up from N160.12 billion in the corresponding Q1 of 2019. Profit before tax (PBT) and profit after tax stood at N46.29 billion and N41.14 billion in that order. The bank gave out more loans as at the end of Q1, which stood at N3.14 trillion, compared with N3.06 trillion at the end December 31, 2019. Customer deposits rose by 4.7 per cent to N4.45 trillion from N4.25 trillion in FY 2019, while total assets expanded to N7.28 trillion from N7.14 trillion in FY 2019.
“Our resolve is to ensure that our customers have best in speed, service and security. We projected merger synergies of N153.9 billion (cost and revenue) over three years. In 2020, we expect to realise significant cost synergies, which will substantially cut down our cost and boost profitability. Being a systemically important Nigerian bank, we are aware that sustainable returns can only come from a sustainable and resilient business model. As such, our intent to embed resilience at the core of our financing activity is further strengthened, as we journey together to building a bank that is more than banking,” Wigwe said.