Access Bank: Leveraging HoldCo Structure for Expansion, Value Creation

Transiting to a holding company structure will enable Access Bank Plc generate more revenue from other non-core banking business, expand its operation, remain competitive in the ever-changing business environment and deliver more value to shareholders, writes Ugo Aliogo

As part of efforts to expand their operation and create more value for their shareholders, more commercial banks in Nigeria have in recent time gotten approval to convert their operations to holding company (HoldCo) structures.

The banking model is expected to also help them diversify their revenue and remain competitive in the financial market.

Previously, FBN Holdings, Stanbic IBTC Holdings and FCMB Group, were the three financial institutions operating holdco structures until last year when the central bank recently granted approval to Access Bank Plc, Guaranty Trust Bank and Sterling Bank and, to convert their operations to holdco.

A holdco is a company set up for the purpose of making and managing (for its own account) equity investment in two or more companies, being its subsidiaries, engaged in the provision of financial services, one of which must be a bank.

For Access Bank will has gotten all the required approvals to commence its holco, the financial institution believes that the move would enable to prioritise value creation, agility to create a self-reinforcing ecosystem.

While Access Holdco would be the parent company in the new structure, the subsidiaries to be created under the new structure are: Access Bank Group; Access Payco Group; Access Lendco; Access Insureco; Access Real Estate, and Others (e.g., ecommerce).

Precisely, there are five reasons the bank is transitioning towards a holdco and it includes value creation – to maximise revenue and value by establishing ecosystems; Agility – to enable the corporation to rapidly respond to a consistently changing market environment while maintaining oversight; to Leverage scale – that is to capture opportunities from local and global positioning to drive top and bottom-line growth; Best-in-class talent – to create an environment that would enable the corporation to hire the best and invest in innovation, entrepreneurship and leadership development, as well as to pool resources – by promote resource sharing  and maximise synergies.

The bank is also using the wider banking model to build a self-reinforcing ecosystem that would be embedded in consumers’ lives

It strongly believes that the new structure would leading to great ambitions

for the institution supported by selected strong partnerships & enablers to scale and among other things, it would see the institution move from                  a local bank to a global brand, from banking only, to an institution that is beyond banking; from one that connects Nigeria, to one that                                 connects the world.

In addition, Access Bank would move from just touching consumers to becoming an institution that is embedded in the consumer                                             life and from a situation where one in every two Nigerians have accounts with the bank, to one where one in every three Africans are its customers and also from being limited by the sovereign to one that is piercing the sovereign ceiling.

March 22, 2022, will make it exactly 20 years after Aigboje Aig-Imoukhuede and Herbert Wigwe acquired Access Bank. Today, from being one of the smallest, most crisis-prone and obscure banks, Access Bank has evolved into a world-class African financial institution.

The Chairman of the bank, Dr. Ajoritsedere Awosika, recently told shareholders that the board considered the restructuring to be the most appropriate to create strategic flexibility and diversification of the group’s revenues.

Awosika said the restructuring would result in shareholders holding shares in the holdco in the same proportion as their current holdings in the bank and the bank’s shares being held wholly by the Holdco.

On the justification for the restructuring, Awosika said the transition to a financial holding company was in line with considerations such as regulatory compliance, facilitation of growth and expansion in banking across Africa, diversification into permissible financial services and risk management.

Awosika explained that the structure would unburden the bank from oversight functions and responsibilities of managing the subsidiaries.

Also, the Group Managing Director/CEO, Herbert Wigwe, appreciated the shareholders for their continuous support since the inception of the bank in 2002.

Wigwe assured the shareholders that the board and management would remain committed to decisions that would take the bank to the next level.

“The institution has grown beyond a lot of one of those things, even the very presence of your institution in several countries requires a different organisational structure to handle all of those things.

“If anybody tells you that there is one managing director who will oversee 20 or 30 countries, it’s a lie. We have to continuously evolve and create a structure that will ensure there is proper oversight over the subsidiaries,” Wigwe said.

Wigwe had disclosed that he was leveraging on the African Continental Free Trade Area agreement (AfCFTA) to expand the bank’s footprints across the continent.  According to him, the plan is for the bank to establish its presence in 22 African countries as well as some strategic locations outside the continent so as to diversify its earnings and take advantage of growth opportunities in Africa.

Wigwe, who took over from his close friend and business partner in January 2014, has ensured that the bank maintained its growth trajectory. Today, the bank which then was ranked 65th among 89 banks operating in the country is presently one of the five largest in Nigeria in terms of assets, loans, deposits and branch network; a feat which has been achieved through a robust long-term approach to client solutions – providing committed and innovative advice.

Wigwe believes that 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,” the bank CEO explained.

Today, Wigwe understands that without embracing change and having foresights, banks would not be able to compete and would be left behind by their peers. This, would definitely impact customer satisfaction, operational efficiency, and revenue growth negatively.

This is why he has continuously ensured that Access Bank under his watch is presently one of Africa’s leading financial services groups. He has shown a relentless pursuit for growth, but in a measured and calculated manner.

“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,” he added.

Specifically, the President, Association for the Advancement of the Rights of Nigerian Shareholders, Dr Farouk Umar, commended the board and management for the foresight of transforming the bank to Holdco.

Umar said that Holdco structure would help in risk management and as well enable the company to diversify into other business opportunities to increase profitability.

President, New Dimension Shareholders Association, Patrick Ajudua, described the Holdco structure as a welcome development that would impact positively on the bank’s bottom-line and improve shareholders’ value.

Ajudua commended the management for smooth running of the affairs of the bank, urging them to ensure enhanced returns on investment for stakeholders going forward.