Build­ing Africa’s largest fi­nan­cial in­sti­tu­tion: A hit or a miss?

Business a.m. - - FINANCE & INVESTMENT -

WHETHER THE DE­CI­SION jointly taken by own­ers of Ac­cess Bank to merge with its tier 2 coun­ter­part, Di­a­mond Bank to cre­ate one of the largest fi­nan­cial in­sti­tu­tions on the con­ti­nent is the right one, is an ar­gu­ment bound to stay on the lips of mar­ket an­a­lysts and fi­nan­cial ex­perts for a while, or at least till the merger is com­pleted and first few fi­nan­cials of the hy­brid com­pany are scru­ti­nised.

Some ex­perts have ar­gued that the terms of the merger are pos­i­tive for share­hold­ers, oth­ers are of the opin­ion that an ail­ing Di­a­mond Bank be­ing left as a le­gal en­tity but sal­vaged by in­ject­ing cap­i­tal to deal with its cap­i­tal ad­e­quacy and non­per­form­ing loan is­sues would have been a bet­ter de­ci­sion.

In de­fense of the pro­posed merger which will see Ac­cess Bank pay Di­a­mond Bank’s share­hold­ers N1 per share plus 2 units of Ac­cess bank shares for ev­ery 7 units of Di­a­mond bank shares held, Her­bert Wigwe, the manag­ing di­rec­tor and CEO of Ac­cess Bank said the merger will pos­i­tively change the nar­ra­tive for stake­hold­ers (cus­tomers, share­hold­ers and Staff) of Nige­rian fi­nan­cial in­sti­tu­tions.

Ac­cord­ing to Wigwe, the merger be­tween the banks aims to syn­er­gize re­sources and strengths to cre­ate an in­sti­tu­tion re­flec­tive of the coun­try of op­er­a­tion, which boasts of own­ing the largest pop­u­la­tion on the con­ti­nent.

“Nige­ria is the largest in Africa in terms of pop­u­la­tion, but Nige­rian banks are not the largest, even in terms of cus­tomer base,” Wigwe said re­cently in La­gos while high­light­ing the ra­tio­nale be­hind the pro­posed merger.

“With the merger the coun­try can boast of a bank with the largest cus­tomer base net­work,” Wigwe said.

The merger will con­sol­i­date the 10 mil­lion cus­tomers owned by Ac­cess Bank as at 30 Septem­ber 2018, and Di­a­mond Bank’s 19 mil­lion cus­tomers at the same pe­riod to form a cus­tomer base of 29 mil­lion cus­tomers.

“This is a huge step to­wards the de­liv­ery of our goal to bring the power of bank­ing to mil­lions of peo­ple across Nige­ria and an ex­cit­ing trans­ac­tion for Ac­cess Bank and Di­a­mond Bank’s cus­tomers, staff and share­hold­ers, Wigwe said

Phe­nom­e­nal op­por­tu­ni­ties to be cre­ated from such cus­tomer base, ac­cord­ing to Wigwe could also in­volve the cre­ation of an ap­pli­ca­tion that could sig­nif­i­cantly boost fi­nan­cial in­clu­sion.

Other out­come of the syn­ergy in­cludes the in­crease of to­tal as­sets to N6.1 bil­lion, 677 branches, 3099 au­to­mated teller ma­chine e.t.c as well as cost syn­er­gies con­ser­va­tively es­ti­mated at N30 bil­lion per an­num, pre-tax, to be fully re­alised within three years post-com­ple­tion,” he re­vealed.

Wigwe fur­ther hinted, that the abil­ity of both banks in find­ing a con­gru­ence point as well as other ar­eas of sim­i­lar­i­ties and val­ues, aids the merger to stand as a start­ing point for an in­sti­tu­tion that can dis­rupt the mar­ket for bet­ter.

“A larger in­sti­tu­tion, much bet­ter cap­i­talised, with farther reach of ac­cess, far out­side Africa with pres­ence in the UK, Mid­dle East and Asia is be­ing cre­ated and this could serve as a power house that no other African coun­try has cre­ated.”

Speak­ing to the con­tro­ver­sial is­sue around staff re­ten­tion, Wigwe pointed out that Di­a­mond Bank has some of the best hands in the in­dus­try, “what is hap­pen­ing is a com­bi­na­tion of our tal­ent pool to sup­port this emer­gent en­tity”. He said a per­for­mance driven ap­praisal method­ol­ogy will be con­tin­ued as erst­while prac­ticed by both banks to en­sure cost ef­fec­tive­ness.

“The idea is to reskill peo­ple, get peo­ple to per­form at the best lev­els that they can be and get peo­ple to be at the same level of stan­dard as far as per­for­mance is con­cerned, across the en­tire in­sti­tu­tion.”

Also as­suag­ing fears aris­ing from an ex­panded share­holder base as re­gards con­sis­tent div­i­dend pay­ment and sus­tain­able earn­ings per share, Roo­sevelt Michael Og­bonna, the group deputy manag­ing di­rec­tor, Ac­cess Bank, stated that the bank’s tra­di­tion of re­ward­ing it’s share­hold­ers with an in­terim and fi­nal div­i­dend will con­tinue as the com­pany is en­gag­ing in the merger to cre­ate value.

“Once value is cre­ated, the main ben­e­fi­cia­ries are share­hold­ers. This trans­ac­tion will be value ac­cre­tive from the first year of le­gal merge and we ex­pect that it will con­sol­i­date on the size, skill and op­por­tu­ni­ties the re­tail bank­ing of Di­a­mond Bank brings with the cor­po­rate power of Ac­cess Bank.

Uzoma Dozie, CEO of Di­a­mond Bank, in his com­ment on the de­vel­op­ment said, “The merger is pos­i­tive for all of Di­a­mond Bank stake­hold­ers, in­clud­ing cus­tomers, em­ploy­ees and share­hold­ers. In par­tic­u­lar, cus­tomers will ben­e­fit sig­nif­i­cantly through the un­ri­valled com­bi­na­tion of the best of Di­a­mond Bank’s re­tail and dig­i­tal lead­er­ship with the size of Ac­cess Bank’s bal­ance sheet, cor­po­rate names and geo­graph­i­cal reach.

“In reach­ing this de­ci­sion, the shared pas­sion for lev­er­ag­ing Nige­ria’s youth­ful and en­tre­pre­neur­ial tal­ent, and a com­mit­ment to bet­ter out­comes through fi­nan­cial in­clu­sion have con­vinced us that this is the right com­bi­na­tion.

“I be­lieve that the com­bi­na­tion of two strong and ad­mired brands, with shared val­ues and com­ple­men­tary strengths, will be a strong force for pos­i­tive change in the Nige­rian and African re­tail land­scape. As a re­sult, this merger cre­ates sig­nif­i­cant po­ten­tial for sus­tain­able long-term growth which stands to ben­e­fit cus­tomers, em­ploy­ees and share­hold­ers alike.”

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