Wigwe: Banking is Evolving Rapidly
Group Managing Director/Chief Executive Officer, Access Bank Plc, Mr. Herbert Wigwe, during an interactive session with journalists highlighted the benefits stakeholders of the institution are going to derive from its new holding company structure. Obinna Chima and Eromosele Abiodun present the excerpts:
From the Beginning
We got into Access Bank in 2002 and we shared with the market the fact that we wanted to create the world’s most respected bank and that was in our first five years. In 2002, we were a tiny institution and we were 69 in number in terms of the list of banks in the country. We shared on the floor of the stock exchange what we wanted to be. We told ourselves that we wanted to be one of the top 10 banks in Nigeria. We would have believed that when you have the likes of FirstBank, Afribank, Union Bank, Intercontinental, Bank of the North and several of other big banks, that we would be able to survive. There was hardly any space for us.
But in that first five years, we move from where we were to becoming one of the top 10 banks in the country. It helped because we had a Prof. Charles Soludo who came in less than two years after we got into the bank and insisted on banks increasing their shareholders’ funds from about $20 million to $250 million. Not many bank could make it. Apart from the top five or seven banks. That single policy led us into the market, we raised capital and acquired some banks and through that whole process, we became one of the top 10 banks in the country. Now, you will ask, how were we able to do that and where did we get the skills from? Right from the first day of getting into Access Bank, we knew that the market was going to change fundamentally.
So, we spent a bit of time with HSBC understudying how that firm had grown from becoming a small bank to one of the largest banks in the world, we learnt from them and they taught us what they had done and the things we needed to put in place if we were doing acquisition. So, in our minds, we had all of that before Prof. Soludo came in and demanded that the shareholders’ funds must increase. So, we went into the next planning cycle which was 2007 to 2012 and we said we wanted to be one of the top five banks in the country and by 2012 we had really grown and we had gone to the international market and issued GDR and raised about $1.3 billion at that point in time and that kept us in a very strong position when a very strong wind came in 2008 and 2009.
So, by 2009 when we had that crisis in the whole world, Access Bank was one of the strongest banks in the continent. Obviously, some of the top Nigerian banks were affected, such as Oceanic, Intercontinental, Afribank, etc, and they just could not make progress because they didn’t have enough capital to basically do what they needed to do. At that time, we had a new Central Bank Governor, Sanusi Lamido Sanusi, who came in and then decided to do a stress test on all the banks. At the end of that stress test, it was clear that Access Bank was one of the strongest banks. We thereafter acquired Intercontinental Bank and subsequently other acquisitions that we had and by 2012, we had become one of the top four banks in the country.
The Third Planning Cycle
We moved into the third planning cycle, 2012 to 2017, and we told ourselves that we wanted to be one of the top three banks in the country. Now, as you know, when you start to move from the smaller base, it is easier. To move from about 100 to top 10 is easier, than from top 10 to top five and to move from top 10 to top five is easier than moving from to 10 to top three. So, we shared with the market that we wanted to be among the top three. But we started working on it, and this time we were growing organically and in all of this we had started growing outside of Nigeria and the idea was to basically start diversifying our earnings from Nigeria. So, 2017 came and obviously we go to where we wanted to get to and we became one of the top three banks in the country. Of course, presently we are in the last five-year corporate strategy plan which ends in 2022 and we told ourselves that we want to be the leading bank in Nigeria and to be the world’s most respected African banks.
And part of what we wanted to do is to be Africa’s gateway to the world. Obviously, there are a couple of things that are important to us: Firstly, is to ensure that we have a strong and diversified base; secondly is to ensure that several things around how we do business and issues around sustainability remain important to us; and thirdly is to support financial deepening and financial inclusion across the country and fourthly, to start ensuring that the quality of our earnings and the reliability and strength of our balance sheet is solid. So, in the period, we did the acquisition of Diamond Bank and through that acquisition, we strong elements of what we wanted do which had to do with digital banking and making sure that we started lending more to retail. So, as of March 2022, exactly 20 years after we started, we are definitely the number one bank in Nigeria, in terms of balance and customer base.
The Need for HoldCo
So, there are several things we are beginning to think of as we move into the next phase of our growth. So, having come from 20 years and gotten to where we are presently, we are now on the verge of basically taking the institution to a totally different bank. So, are moving from just being a Nigerian institution, to creating a much-more diversified institution in scale, scope and the nature of things that we do. Access Bank is basically transforming and we are now creating a holding company and I will give you some of the reasons we are doing what we are doing. First of all, the world is changing and technology has changed how things happen. I recall that about 25 years ago, if you wanted to sell debit cards, it was impossible. But that is gradually becoming extinct because a lot more payments are happening digitally. Secondly, if you look at the demography in the world, what they are asking for is digital payments and they are not waiting for the traditional banking system. That is, for them to be able to do several things through the touch of the button.
So, the world is changing and if you as an institution is not part of that change, you may wake up one day and find out that you don’t have an institution. We are all used to when we used to have VCRs where people play video games and you rent films from mega plazas during the weekends, just to watch movie. The world has gone away from that and today, you can just go online to do whatever you want to do. Now, banking is changing and it is evolving rapidly. Technology has made it such that you can serve customers, even from the most remote village. So, there is a big change happening at a faster pace than we can imagine in the banking sector. If you look at the way banks are valued, they are always valued from the traditional banking mindset, meanwhile they have the capabilities of creating institutions that can compete with fintechs and provide additional revenue over and above what they were doing as banks.
So, what the Holdco strategy allows us to do is to begin to look at new markets and new opportunities that a traditional bank cannot offer. So for us, we are setting up a lending company. It must create its own customers outside of what exists in Access Bank to compete for market share. So, there would be a lot more financial inclusion, a lot more lending to young people, a lot more ease in terms of opening accounts, among others. The traditional banks are very heavy in terms of cost and expectations, compliance, etc, but what this type of institution does is that it provides the opportunity to support the mass market already, whether it is a pay day loan, you want to fix your car or buy a car. Now our payment company, which is the PayCo, is one that would be supporting our Business-to-Business and Business-to-Customers relationship, customer-merchant acquisitions, etc.
It is going to be settling payments across the continent. It is not just about Access Bank, they are also going to create a global access payment gateway to ensure that payments are settled not just within Nigeria, but across the entire continent. What PayCo does for us is that it would enable us have in-roads into businesses where didn’t have capacity. I will give you an example, today if you use your Access Bank mobile phone, you can make payments to anybody and anywhere in the world. So, what we are trying to do is to push and support payments, whether it is by way of trade, diaspora remittances across the entire continent. Our insurance brokerage business is to help us preserve monies that ought to be paid to other firm. And the final one is our pension company. Obviously, because of our size and our platform and the opportunities, we are going to be playing big in the PFA market.
All of these things are complementary and the bank is going to build on all of these things to get the full benefits of the HoldCo and the different investments. Obviously, things around agility, taking advantage of the scale of the parent company which is Access Bank are important, managing talents are also very important. If you take technology for instance, most of the talent in that market don’t want to work in traditional banks. So, what we have done is to create a structure where we can take them, train them and create a proper career path for them for the benefit of the entire group.
The Access Bank Group
The Access Bank group would continue to grow across the continent and outside of Africa and the whole idea is to be the world’s most respected African bank. My sense is that by 2027, you would see it getting close to being one of the top five banks in the continent. You will also see us regionalising. We would have a regional office in Ghana that is responsible for West Africa; an office in Nairobi that would be responsible for East Africa; an office in Botswana that would be responsible for Southern Africa and South Africa is big enough to have its own regional office. Consumer lending, retail, MSMEs, all of those things required to support the growth of the economy, we would focus on them. Customer experience is important and as we grow we would ensure that we are providing same level or better services in terms of turnaround and customer experience across the entire continent.
As long as technology is concerned, we are creating strong and reliable technology to ensure that customers’ expectations are met. Of course, risk and capital management are critical to our business and we would continue to use the most sophisticated tools that can stand the best of time. Culture is important and I guess one of the things you would keep asking us as we grow is how do you ensure that we maintain culture as we grow, particularly inorganically. But despite the fact that we are growing inorganically, we are ensuring that we entrench all the things required to build culture. Culture takes time to build, but we are trying to make sure as much as possible that the Access culture is entrenched.
Strategy to Becoming Number Five in Africa
The same question was asked in 2002. We would be measured through the bank’s scorecard metrics, you would look at our risk ratings, our profitability and our overall balance sheet size. There has never been a time that we shared with our stakeholders and the market what our vision are in the past 20 years and we never achieved it.
Will the Subsidiaries Require Fresh Licences
Some are going to go outside the country. The payment company by definition is going to go outside the country and where we have presence. Would they require separate licences, in some, yes, and in others, no. So, it depends on the specific subsidiary. Remember that it is not just about Access Bank; if you are looking at Access Bank, the market would be valuing it as an institution that is dealing with same customers. But, what we are seeking is the additional businesses outside of Access Bank. So, all of these subsidiaries would be fighting for market share outside. I think that the next three to five years, the picture would be so fundamentally different from the last 20 years. And that is because we do have strong staff to drive the process.
Access Bank Stock Market Valuation
I will continue to focus on the fundamentals and how to grow our business and then let the play out itself. Hopefully, it will over time choose where the price will be. It will correct itself. But I will tell you some of the things that scare investors. When an investor sees that you are expanding within the continent, he gets worried. Once you are doing that, it will affect your market capitalisation. But it doesn’t matter; the most important thing is: What are your long-term aspirations and are you keeping through to it? Look at us 10 years ago, in terms of the contributions of our foreign subsidiaries to the overall, today it is 30 per cent. So, one day, same investors who were putting that question mark would realise they are making mistakes. Now, it gets more interesting when your off-shore subsidiaries have better risk ratings. My sense is that all of these would change over the next year or so and investors would begin to ask themselves why they didn’t invest earlier. So, we would continue to speak to our core stakeholders and share with them this vision of the picture of tomorrow, hoping that as the news continues to filter into the market, people would see the need to invest in the company.
Listing of the HoldCo on NGX
Now that you are moving a lot more out of Africa, are you considering listing on other jurisdictions and what would be the key focus of your expansion, do you want to be a pan-African bank? First of all, the Banking Act establishes that you choose to become a HoldCo or a narrow banking licence. So, under Sanusi, we listed Access Bank, which is just the bank. Now, when we finished our five-year corporate strategy, we told ourselves that we wanted to create a different kind of institution, that would be a global company. Therefore, the narrow licence would no longer be sufficient. So, we decided to go for a HoldCo. Now, through a scheme of arrangement, the existing shareholders of Access Bank migrated to the HoldCo. Now, we had to delete the traditional bank from the main bourse and put the HoldCo, where Access Holdings is the main shareholder. Are we creating a pan-African bank? The answer is no; we are creating a global institution. Now, one of the key things we are going to be focusing on in the continent is trade.
Trade has been one of our strongest strengths and it is something we have pursued, even before the Africa Continental Free Trade Area (AfCFTA) agreement came into place. We told ourselves that we want to be Africa’s gateway to the world. What that does is that it means that you will support intra-African trade; there is diaspora remittances and the third has to do with payments. So, those are things that we are doing and we are doing better than the rest. In the areas which we have not consolidated, through our payment company structure, we would literally build that in-road seamlessly across the continent. As Africa, we must support and develop our continent ourselves. So, supporting local businesses is important, ensuring greater financial deepening is also important and if we grow our continent to be strong, then institutions within the continent would be stronger. However, you need to manage risks as you do this. So, in some markets that are large in terms of trade, we would basically do more to support businesses. All of these things stand on a tripod: Strong capital – both financial and human capital; strong risk management and strong governance and the governance framework has to run through everything that we do.