Nigeria: Access Bank Reaping Benefits of Merger, Says Afrinvest CEO

11 September 2019

The Group Managing Director of Afrinvest West Africa Limited, Mr. Ike Chioke, yesterday said the recently released first half 2019 results by Access Bank Plc showed that the bank has started reaping its benefits with former rival, Diamond Bank.

Chioke, said this in an interview on Arise Television Global Business Report, which he featured alongside the Executive Director, Risk Management, Access Bank, Dr. Greg Jobome.

The bank's recorded improved performance in the half year(H1) ended June 30, 2019, as its audited results showed gross earnings of N324.4 billion, indicating a growth of 28 per cent from N253.0 billion in the corresponding period of 2018. The growth in gross earnings was driven by 46 per cent increase in interest income on the back of continued growth in its core business and 22 per cent non-interest income underlined by strong recoveries.

In addition, the bank posted a jump of 62 per cent in profit before tax, to N74.1 billion in 2019, compared with N45.8 billion recorded during the same period in 2018, while profit after tax rose 59 per cent to N63.01 billion, up from N39.6 billion in 2018.

Total assets went up by 31 per cent to N6.48 trillion as at June 2019, in comparison to N4.95 trillion in December 2018, while Capital Adequacy Ratio (CAR) remained solid at 20.8 per cent, well above the regulatory minimum.

Access Bank and Diamond Bank became an entity on April 1, 2019.

Commenting on the performance, Chioke said: "I think we were pleasantly surprised with the results and the dividends of the merger has come true. If you see the top-tier banks that had announced their earnings, top line growth was quite modest in the single-digit region, but Access Bank recorded 26 per cent growth, to N320 billion for the half-year 2019, which was a massive jump.

"We have seen a massive jump in deposits. Indeed, the diversity of the bank's deposit base is becoming much stronger. At some point, the funding of the bank was driven by borrowings, including Eurobonds and from the commercial paper market, but now you have a much deeper pool of deposits.

"With that, the borrowing mix has gone up from 58 per cent deposit ratio, to about 71 per cent ratio."

Owing to this, the financial market analyst said investors should be delighted, adding that the 25 kobo interim dividend its board declared was reassuring.

"There are six tier-one banks in the market as you know and I would say Access Bank is presently ranking number one or number two, depending on the parameters you are looking at.

"In terms of efficiency, there is still work to do, but that comes from a sense of scale. In terms of assets, the bank would be number two now, behind Ecobank Transnational Incorporated (ETI).

"So, if you take away ETI, they are number one among the traditional Nigerian banks. Obviously, having digested an entity like Diamond Bank, you will still need time, probably about 18 months, to really bring the cost containment, back in alignment and then begin to reap the full benefits of the merger. So, in terms of efficiency ratio, there is still work to do," he explained.

Responding to a question, Jobome said the management and board of the bank were confident that there was value to be nurtured in the merger.

This, he said was why due diligence was done to ensure that it offer value accretion for shareholders and stakeholders.

"What we are seeing now is just the beginning because there is still so much to be reaped from that merger. If we are already showing this kind of numbers, I think there is so much to come in terms of the future and how the growth trajectory is going to go. In the short-term, we would be doing all the cleaning up that we need to do.

"We have to get the work culture, people and customer base optimised and if we are showing this kind of number, then the future is bright," he added.

He disclosed that Access Bank's non-performing loans (NPLs) stood at 6.4 per cent, which he said was a massive reduction, considering the 10 per cent it was after the merger.

"So, we are doing more cleaning up and if at the end of the year we are able to achieve five per cent, that would be fantastic. Even though that is a tall order, we would do our best to achieve that.

"Access Bank has always had the lowest NPL ratio in the industry, so it is a place we are heading to. But in the meantime, there is the cleaning up and recoveries and the loans that went bad in Diamond Bank, we are pursuing. So, all the numbers are in the right direction."

Jobome said the bank was deploying all apparatus of the law to recover the bad debts from recalcitrant debtors and that there had also been write-offs.

"Of course there are the good ones and we have kept those ones on a nice relationship scale. In most cases, if you were a borrower before the merger and you were borrowing at different rates in the two banks, we decided that you are now going to borrow from the lower end of the two interest rates," he added.

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