The past few months have seen financial institutions venture into the debt market in order to strengthen their operations and heal from the devastating effects of the COVID-19 pandemic.
This is also expected to help position lenders for another burst credit in the coming years and enable them meet pent-up demand from borrowers such as households and firms in the continent like Africa with huge infrastructure deficit.
One of the financial institutions that successfully tapped the debt market recently was Access Bank Plc. The Nigerian-based tier-1 bank issued a $500 million 144A/RegS Senior Unsecured Eurobond, as part of its Global Medium-Term Note Programme.
According to a notice to the Nigerian Exchange Limited (NGX), signed by the Company Secretary, Access Bank, Sunday Ekwochi, the transaction recorded massive interest from top quality investors globally, including the United States, Europe, Middle East, Asia and Africa, anchored by a number of large tickets.
The offering, Access Bank stated, achieved the lowest (outstanding) Nigerian bank Eurobond coupon, “supported by an over 3x oversubscribed orderbook of over $1.6 billion, which represents the largest orderbook ever for a Nigerian bank Eurobond transaction.”
The bank added that the bond, which would mature on September 21, 2026, was issued with a yield and coupon of 6.125 per cent, with interest payable semi-annually in arrears.
“The coupon of 6.125 per cent is another first in the corporate Eurobond issuance space. Interestingly, the bond is already trading at a premium from issue levels with bids around 5.89 per cent levels whilst offers are around 5.78 per cent as the unmet demand from the auction filtered into the secondary market,” Access Bank explained.
The bank had few years ago announced the final redemption of its $350 million Eurobond notes due July 25, 2017. The securities were issued in 2012, by Access Finance B.V., a direct, wholly owned subsidiary of the bank, on the back of an unconditional and irrevocable guarantee of the bank.
Indeed, the fresh capital confirms the insinuation in the industry that the Group Managing Director of Access Bank, Mr. Hebert Wigwe, is not about to slowdown anytime soon, in his aggressive expansion drive.
In the past few years, the expansionist adrenaline rush in the Chairman of the Body of Bank Chief Executive Officers (CEOs) has remained on the rise. Today, Access Bank has evolved from an obscure bank into a world-class African financial institution.
In a string of expansion across Africa, the bank had said it is leveraging the African Continental Free Trade Area agreement (AfCFTA) to expand its footprints across the continent. That is why since its acquisition in 2019 of former rival, Diamond Bank, the bank has continued to plant subsidiaries across the continent. The merger was driven by the need to combine the unique strengths of the two institutions to produce a financial powerhouse, and the desire to guarantee customer satisfaction.
Today, it is one of the five largest banks 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.
Staying true to their goal of becoming Africa’s gateway to the world, Access Bank has built its strength and success in corporate banking and is now applying that expertise to the personal, business as well as retail banking.
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.
He stated that 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.
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.
The bank sustained its positive momentum in terms of its financial performance in its recently released first half (H1) 2021 results.
In the period under review, the Group recorded an improvement in gross earnings by 14 per cent year-on-year, to N450.6 billion, as against the N396.8 billion it recorded in same period in 2020, just as its profit before tax grew significantly by 31 per cent year-on-year to N97.5 billion, up from the N74.3 billion it posted in the comparable period of 2020. Also, profit after tax (PAT) grew by 42 per cent year-on-year to N86.9 billion, higher than the N61 billion it realised in the first half of 2020.
The profit growth was buoyed by a 30 per cent year-on-year growth in interest income, 45 per cent year-on-year increase in net fee and commission income, and interest expense remaining flat (-0.7% y/y).
The assets base of the Group remained strong with total assets of N10.1 trillion in June 2021. This represented a growth of 16 per cent year-to-date, from N8.7 trillion in December 2020.
In addition, despite the inflationary environment and increased regulatory costs, the financial institution’s cost-to-income ratio stood at 60.1 per cent, a 570-basis point reduction from the 65.8 per cent it realised in the first half of 2020.
Also, the bank saw its retail banking business continued to grow with a 24 per cent year-on-year increase in gross earnings to N118.6 billion, up from the N95.8 billion recorded in the first half of 2020.
The growth was driven by a 46 per cent year-on-year increase in interest income and a 37 per cent year-on-year growth in revenue from its channels and digital businesses.
During the review period, Access Bank also recorded progress in its financial inclusion objective to bank one in every two Nigerians as it added 2,371,832 new customers as well as 16,428 new agents, creating more employment and providing convenience to our customers.
According to a report from the bank, the strides in its retail business resulted in growth in its savings deposits to N1.4 trillion, which was a four per cent growth, from the N1.3 trillion it recorded in December 2020, and a cost-of- funds reduction to 2.9 per cent, as against the 3.7 per cent posted in the first half of 2020.
Furthermore, the bank explained that its push for digital innovations to improve efficiency for its customers resulted in significant increase in its USSD transaction volume (+62% y/y) and its mobile and internet banking transactions volume (+67% y/y).
Also, despite the challenging economic environment, Access Bank maintained strong asset quality with a stable non-performing loan (NPL) ratio of 4.3 per cent, same as of December 2020.
It also expanded its loan portfolio, supporting sectors with the highest impact on the economy, with good quality assets as reflected by the growth in its net loans and advances to N4 trillion year to-date, as against the N3.6 trillion recorded as of December 2020.
Furthermore, it maintained robust capital and liquidity positions well above regulatory levels, with a Capital Adequacy Ratio of 21.3 per cent and a liquidity ratio of 50.7 per cent, which positioned the bank to support its customers and execute its growth strategy.
Commenting on the results, Wigwe, pointed out that over the last few months, the financial institution has successfully completed acquisitions in South Africa, Mozambique, and Zambia, emphasising its footprint in key markets around the globe.
“We will continue to grow our presence in geographies with significant growth potential, especially where they support our global customers. As we become Africa’s Gateway to the World, we would also seek markets which supports our trade and payments aspirations and the African Free Trade Agreement.
“To further enhance our operating efficiency and ensure strong returns on invested capital, we will bring the best of our group assets, specifically our digital banking capabilities that support individuals and businesses, enhance financial inclusion, and deliver the benefits of a strong network effect across our enlarged Group. “Throughout the pandemic, we have been able to demonstrate our ability and willingness to support our customers, our communities, and our colleagues.
“As the outlook improves, and as business returns to a new normal, we will continue to support our communities in order to stimulate growth and create new opportunities,” the bank chief added.
According to him, to accomplish the vision to be the World’s Most Respected African Bank, Access Bank is working together across the Group on the back of its robust balance sheet, increased retail momentum and efficiency.
“Finally, I would like to thank our staff, shareholders, and other stakeholders as we could not have achieved these results without their dedication, commitment, and support,” he added.
From Nigeria to Rwanda, South Africa, Mozambique, Kenya, Zambia, among several others, the expansionist adrenaline rush in the Chairman of the Body of Bank Chief Executive Officers (CEOs) has remained on the rise. Wigwe is not about to slowdown anytime soon.
As an established leader in the Nigerian and indeed African banking industries, Access Bank has 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.
Over the last couple of years, Access Bank has focused its expansion efforts on powering digital payments across Africa.
In addition, Access Bank has digitised a significant number of its back-office processes and functions with a business process management solution, and is working towards becoming a 100-percent-paperless organization. This allows for more seamless operations across all the ank’s branches globally.
Probably the first and most important benefit of Access Bank’s expansion is the rate at which the bank has been able to scale – growing its customer base with unprecedented ease. Clearly, this has made it easier for it to secure a broader geographic footprint across Africa and the rest of the world.
