Access Bank to leverage HoldCo structure for expansion
Access Bank Group looks forward to another decade of growth as it begins the process of evolving into a holding company (HoldCo) following a successful court-ordered meeting last week.
The non-operating HoldCo to be known as Access Holding Company Plc would serve as the parent company for the group – Access Bank and its many subsidiaries.
The restructuring is being implemented through a scheme of arrangement following Section 715 of the Company and Allied Matters Acts (CAMA) and the Securities and Exchange Commission (SEC) rules.
The bank is looking at a one-for-one share as it migrates the shareholders of Access Bank to the new company.
Last Thursday, the bank’s shareholders voted overwhelmingly in support of the new scheme. The shareholders and directors also spoke of the benefits of the new restructure and were optimistic that the bank was set for another era of growth.
Board Chairman, Dr. Ajoritsedere Awosika, said the restructured group would have a ‘’structure like that of some major global financial institutions, including those Access Bank considers to be its peers and competitors.’’
Under the new structure, which will take off next year, the parent company will hold 100 per cent shares of Access Bank Nigeria and 100 per cent shares of all non-banking subsidiaries of the bank.
Access Bank Nigeria will, in turn, own all its banking subsidiaries (15 in total) and all its three representative offices in India, China and Lebanon. Awosika said the restructured group would “have greater flexibility to adapt to future business opportunities, market and regulatory changes than is currently the case.’’
The Chairman also listed seven key benefits of the new structure. Among them is regulatory fulfilment in which the HoldCo structure would ensure full compliance with the Central Bank of Nigeria’s (CBN’s) Regulation on the Scope of Banking Activities and Ancillary Matters (2010). This regulation limits the business activity of a bank to strictly commercial banking business, and thus allows such non-banking businesses to be transacted through subsidiaries owned by the HoldCo.
She said the new structure would facilitate the bank’s growth and expansion across Africa, ease consolidated financial strength, expedite capital and liquidity growth, provide flexibility to accommodate leverage with minimal risk to regulatory rations and held to unburden the bank from oversight functions and responsibilities of managing the subsidiaries, thus focusing on its core operations.
“Due to its oversight functions, the HoldCo structure will facilitate the growth of the banking group and expansion of services into underpenetrated regions in Nigeria, Africa and beyond. The new structure will also enable Access Bank to diversify its business portfolios into new areas within the financial service industry that are permissible by the CBN, and, in addition, will ring-fence each business from the risks of the other, by preventing the business performance of one business from affecting the performance and valuation of another.
Accordingly, under the new structure, the assets of the bank are ring-fenced from the non-banking businesses,” she said.
The bank’s Group Managing Director and Chief Executive, Herbert Wigwe, appreciated the shareholders for their support since 2002 when he and Aigboje Aig-Imoukhuede took over the bank.
“Whether at AGM, EGM or court-ordered meetings, our shareholders had always been behind us in the last almost 20 years’’, he said, noting that the new structure was designed to build a great future for the institution as the bank is spreading from one country to another. He emphasized that the HoldCo structure was necessary for effective supervision of the subsidiaries, which are located in about 20 different countries.
One of the possible drawbacks of the new structure is that it entails the establishment of three different sets of boards of directors at the HoldCo, bank and subsidiary levels, and this has some cost implications. But Wigwe said an expensive board could not be compared with weak governance and “think the shareholders should take a long-term view of the business”.
‘’Since 2002, we have become the biggest bank in the country in terms of assets and customer base. In the UK, we are one of the best banks there. We are in a clearinghouse in the UK. But when we were about to go to the UK, some were not enthusiastic about it. Similarly, in the next five years, our presence in South Africa will be equally impactful and successful’’, he said.
Dr. Farooq Umar, a shareholder, said the HoldCo structure would enhance business diversification and share price appreciation. Another shareholder said: “This is a welcome development in the interest of the bank, shareholders and other stakeholders as it will strengthen the growth and expansion of the bank in the years to come.”