One year after the acquisition of one of the then rescued banks, Intercontinental Bank Plc, by Access Bank Plc, Festus Akanbi and Obinna Chima write on the benefit of the deal to Access Bank

Over the years, the Nigerian banking industry has experienced progressive reforms and intervention by the regulator.

These reforms have brought about unprecedented transformation with far-reaching implications on the industry. Indeed, globally, reforms have helped to restore public confidence and sanity in financial markets.

In Nigeria, the series of the reforms in the banking industry in the past three years became imperative when the Central Bank of Nigeria (CBN) identified poor corporate governance, poor risk management practices and inadequate disclosure among others in the industry.

Nevertheless, one year after the re-capitalisation exercise, Access Bank Plc which acquired one of the then rescued banks - Intercontinental Bank Plc- has recorded remarkable improvements in both its financial performance and operations generally. The business combination deal has so far elevated efficiency in the financial institution.

Refocusing Business Strategy

Access Bank has also refocused its commercial banking business to help build sustainable annuity income base for the institution.

A recent report by Vetiva Capital had said the move would impact on the commercial bank's profitability going forward.

Access Bank, which has also climbed into the legion of Nigeria's top four commercial banks, is now adjudged a Tier 1 bank.

The Vetiva report said: "Access Bank's enlarged balance sheet and increased customer base as a result of its acquisition of Intercontinental Bank would further strengthen its treasury business."

Financial Performance

Access Bank reported audited profit before tax (PBT) of N30.07 billion in its half-year ended on June 30, 2012. The result also showed a quantum leap in key profitability indices. The bank's profit after tax (PAT) grew by a staggering 225 per cent to N26.13 billion compared with the N8.08 billion recorded in the corresponding period in 2011. Similarly, the bank's profit before tax (PBT) rose from N12.37 billion recorded for half-year in 2011 to N30.07 billion in June, 2012. This represented a 143 per cent growth over last year's performance. The impressive performance was also evident in the bank's earnings for the period as its gross earnings rose by 103 per cent to N108.7 billion in relation to last year's figure of N53.65billion. The bank's deposit book also showed some growth in the half year result as it advanced by nine percent quarter-on-quarter.

Commenting on the result, Renaissance Capital (RenCap) which stated in a report that Access Bank delivered good results, expressed optimism that the commercial bank will deliver healthy returns this year. It explained: "We liked the improvement in the quality of the book with the non-performing loan (NPL) ratio falling to levels which we find more comfortable." Continuing, the financial advisory firm stated: "We believe the bank has now turned the corner on deposit losses, as witnessed by the growth in second quarter 2012, even at the fixed-deposit level. As a result of the pick-up in loan growth, the loan/deposit ratio showed a slight improvement to 54 per cent.

"After contracting in first quarter 2012, it was encouraging to see a rebound in Access's gross loan book. The book grew 10 per cent quarter-on-quarter after a 6 per cent decline in first quarter 2012. We note, however, that growth was driven by loans to individuals (up 31 per cent year-to-date) and loans to banks (up over 10-fold)."

On his part, Group Managing Director/Chief Executive Officer, Access Bank, Mr. Aigboje Aig-Imoukhuede, said: "I am pleased to announce that Access Bank has delivered very strong audited results for the first half of 2012 whilst also completing our post-merger integration with remarkable success.

"We are now firmly established as a top tier Nigerian Bank. Leveraging on our sustainability driven business philosophy, robust capital position and the quality of our workforce, I am confident that we will continue to deliver strong returns for our investors in 2012".

Analysts also described the performance as a valid testament to its financial strength and capacity for sustainable growth. This, according to them, reflects that the commercial bank has started benefitting from its acquisition of Intercontinental Bank by leveraging scale and access to large retail deposit base evidenced by the Bank's low cost of fund.

Access Bank now has customer base of over 5.7million, network of 310 branches and over 1700 Automated Teller Machines (ATMs).

The bank recently revised its corporate philosophy to highlight its vision of becoming "Africa's Most Respected Bank". This vision is underpinned by the Bank's adoption and entrenchment of the principle of Sustainability at the core of its operations. Access Bank obtains its operational legitimacy through commitment to responsible business practice and promotion of sustainable social agenda. The Bank has over 800,000 shareholders including several Nigerian and International Institutional Investors and has enjoyed what a successful banking growth trajectory in the last ten years.

Share Price Movement

From N5.04 per share as at close of ringing bell on January 3rd, which was the first trading session on the Nigerian Stock Exchange (NSE) this year, Access Bank's share price jumped significantly by 77.6 per cent as it closed at N8.95 per share on October 2. Access Bank's share performance monitored by THISDAY showed that the highest value the stock which a lot of investors have predicted will climb further has attained this year (as at October 2), was the N9.55 per share it closed on September 13th and 20th respectively.

International Ratings

The reforms has also continued to impact positively on the sector as some of the banks have been enjoying good ratings based on their enhanced positions. For instance, while international rating agency- Moody's, then downgraded the ratings of 15 of the world's largest banks weakened by the banking crisis, Access Bank, enjoyed an upgrade.

A look at the bank's ratings by the agencies revealed major upgrades which were attributed to the bank's improved market position, strong capitalisation, strong liquidity profile, enhanced distribution network and expanded client base. Specifically, Fitch, a United Kingdom-based rating agency, had upgraded the bank's long-term Issuer Default Rating (IDR) to 'B' from 'B-' while the bank's National Long-term rating was upgraded to 'A-(nga)' from 'BBB-(nga)'. The rating agency upgraded Access Bank's outlook from positive status to stable, showing an impressive three notches up. Similarly, S&P upgraded its long-term Nigeria national-scale rating to 'ngA' from 'ngA-' with its outlook raised from 'negative' to stable' while Augusto & Co, Nigeria's leading rating agency, upgraded its 'BBB' rating of the Bank to 'A-'; still maintaining its 'stable' rating of the bank's outlook.

S&P linked its improved rating to the bank's strong liquidity and funding position, which are clear affirmation of its position as one of Nigeria's Tier 1 banks. It added that the enhanced capacity to execute larger transactions as well as access long-term funding from foreign multilateral agencies and institutions as another reason.

On its part, Augusto said: "Access Bank's funding has been strengthened by an enlarged branch network following consolidation, which has availed the bank a vast pool of low-cost deposit. In the year under review, local currency deposits grew by 114 per cent to N871billion". Similar to S&P's opinion, Access Bank's improved rating is attributable to its strong liquidity and funding position, which is a clear affirmation of its position as one of Nigeria's tier 1 banks and corroborated by its enhanced capacity to execute larger transactions as well as access long-term funding from foreign multilateral agencies and institutions.

In its assessment, Fitch Ratings attributed its upgrade of the bank's ratings to its increased systemic importance and enhanced franchise following its absorption of Intercontinental Bank Plc. Specifically, the bank's management has remained committed to best practice in the areas of corporate governance and risk management.