As Access Drives Revenue Growth through Retail Banking

Herbert Wigwe


Access Bank has been driving its revenue growth through retail expansion, driven by a strong focus on consumer lending, payments and remittances, as well as customer acquisition at scale, writes Obinna Chima

It is no secret that achieving revenue growth in an earnings-constrained and ever-increasing competitive environment remains a major challenge for traditional banks globally.

The situation was further worsened by the outbreak of the COVID-19 pandemic which has also led to an increased incursion by financial technology (fintech) players into the financial services segment.

According to a report by Deloitte, a global professional services firm, as the low interest rate regime and new regulations continue to strangle traditional sources of risk-based and fee income, many once-attractive customer relationships are generating less revenue, causing some to become unprofitable.

With this, many bank executives are finding that the old tried-and-true strategies for organic market share and revenue growth are not sufficient anymore.

Owing to this, they have continued to deepen their retail banking strategies and fine-tuning their products to laser in on the remaining attractive opportunities. One of such banks is Access Bank Plc.

Its consumer lending business has seen 60 per cent growth in digital lending volume and value. Access Bank has been driving its revenue growth through retail expansion, which has grown consistently across all income lines, driven by a strong focus on consumer lending, payments and remittances, digitalisation of customer journeys, and customer acquisition at scale

It has also maintained strong capital levels despite investments for growth and has accumulated capital over time.

The bank under the leadership of Herbert Wigwe is currently in hot pursuit of its legacy debts which runs into billions of naira from recalcitrant debtors of former Diamond Bank Plc which it acquired few year ago.

It is currently locked in court battle with Seplat Chairman, ABC Orjiako, Seplat, its allied company, Cardinal Drilling Services over an $85 million by Cardinal. There are other high profile debtors are not happy with the vigour and resolve to recover the debts and are fighting back. But that has not deterred the leadership of the bank to remain focused on recovering the debts.

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, the bank recorded gross earnings of N764.7 billion for the financial year ended December 31, 2020, which was a 15 per cent improvement from the N666.75 billion posted for 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 UK.

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.

In view of the opportunities that exist in the market, Access Bank recently disclosed plan to transit to a holding company (HoldCo) structure. The bank has received the Approval-In-Principle from the Central Bank of Nigeria for the restructuring and the HoldCo will consist of four subsidiaries in order to tap into the market opportunities that are available in the consumer lending market, electronic payments industry and retail insurance market.

Access Bank Group will consist of Nigeria, Africa and international subsidiaries, while the payments subsidiary will leverage the strong suite of the bank’s assets, Wigwe said.

“Going into the fourth year 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, the 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 its consumers new products. An example was 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.

Access Bank has also embraced digital technology to propel both its sustainability targets and its African gateway strategic drive. This is evident in the bank’s 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 that implement a global viewpoint while still focusing product offerings on Africa. Access Bank plans to harness the very best Nigeria has to offer, working closely with them to make Nigeria a retail banking powerhouse. The bank has also continued to develop products to support digital payments across Africa.

Expansion Drive

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).

The countries are Morocco, Algeria, Egypt, Ivory Coast, Senegal, Angola, Namibia and Ethiopia. Presently, the tier-one bank operates in 12 countries.

According to Wigwe, across Africa, there is an opportunity 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 office in London 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.

According to him, 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.

“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 to, 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 further, on 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 CEO said.

Enhancing Customer Experience

As part of its commitment to increase access to banking services in communities across the country, Access Bank last week 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 its customers.

The bank described the move as a timely intervention to mitigate the effect of restrictions caused by the COVID-19 pandemic. It stated that the branches would be located not less than three kilometres or more than 20 kilometres from the nearest existing Access Bank branch, and would offer banking services such as cash deposits and cash withdrawals (no 3rd party withdrawals), customer on-boarding, funds transfer subject to a limit of N150,000, BVN enrolment, card issuance, card activation, cheque deposit, bills payment, and ATM services.

According to Wigwe, “Access CLOSA was introduced last year, and now, the peculiarities of the coronavirus has made it even more important to bring banking services closer to the people.

“Access Bank understands that the risk of transmission is higher in congested spaces and to mitigate this risk, we will be commissioning 10 more banking outlets to serve the needs of our esteemed customers.

“The CLOSA banking service is not being introduced to replace our existing branches, but rather aid the Bank in delivering on its commitment to offer best-in-class service to our customers. We are not aloof to the threat of the COVID-19 pandemic, and whilst we will do all that is required to ensure branches remain safe for our employees and customers in line with the protocol advised by the health authorities, we urge our customers to leverage on our digital channels in carrying out transactions.”

Clearly, retail banks achieve scale by capturing market share, increasing revenues as it allows them to compete effectively over the long term, which is what Access Bank has continuously focused on.