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Containing cost and weathering the storm in a pandemic era

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The world economy is currently facing a nightmare, as the growing COVID-19 crisis continues to disproportionately ravage both developed and developing economies, not only in public health in the short term, but is also a devastating social and economic pandemic.

Indeed, the global coronavirus death toll has exceeded 300,000. Aside the havoc the pandemic is wreaking on people’s health, millions of employees are losing their jobs, while millions more have been furloughed, as the plague takes a toll on every facet of life.

To put things in proper context, more than three million Americans have filed unemployment claims, bringing the totals who have sought government support since mid-March to 33 million.

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According to the Bureau of Labour Statistics, the U.S. economy lost 20.5 million jobs in April, an unprecedented number since 1939. In March alone, employers slashed 870,000 jobs.

Sadly, a sour recollection of the great depression has sprung up, and this depression is envisaged to become the worst economic downturn in the history of the industrialised world, compared to the previous, which lasted from 1929 to 1939. When the economic depression reached its lowest point in 1933, about 15 million Americans were unemployed and nearly half the country’s banks had failed.

Nigeria is not insulated, as many informal businesses were forced to shut down amid the pandemic. Their losses are yet to be adequately computed.

In the financial sector, banks were forced to close some of their branches in the wake of the lockdown directives by the Nigerian Government, and the Central Bank of Nigeria (CBN).
Indeed, virtually all the banks are currently grappling with the ugly realities of crashing oil prices, and this has led to a growing concern that one of Nigeria’s Tier One banks, Access Bank Plc, planned or had sacked some of its workers.

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In a statement signed by the bank’s Company Secretary, Sunday Ekwochi, posted on the Nigerian Stock Exchange (NSE) website, the bank clarified that the closure of a bank branch was an action that required the approval of the CBN.

According to the bank, it has neither applied nor obtained the approval of CBN for the closure of its branches as widely speculated.

“The bank has only suspended operations in some branches following the directive by the CBN. At the onset of the COVID-19 pandemic lockdown, we suspended in-branch operations at different locations as directed by the CBN.

“This is in line with business continuity plans at vulnerable spots; whilst we continued to provide services through our alternative digital platforms,” it stated.

Furthermore, the bank said: “In line with the phased re-opening of the economy effective May 4, following the presidential directives, we will be resuming in-branch services in some of our affected branches in a programmed manner to ensure the health and safety of our employees and customers.

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“This is also necessary to provide relevant contingency should there be any incident arising from the pandemic. We deny in its entirety the baseless and twisted speculation that the bank is sacking 75 per cent of its workforce.”

It clarified that based on the impact of the COVID-19 pandemic, not all its branches would be fully open for in-branch services until later in the year.

“This has made it impossible for many of our outsourced workers to perform duties as usual. We have commenced engagement with various stakeholders with a view to ensuring that they provide the relevant services and optimum manpower as may be required by the bank on an on-going basis,” it added.

This notwithstanding, experts believe that Access Bank would not have erred if it had chosen to lay off or furlough some of its workers in the context of the COVID-19 crisis. But it is not doing so.

It had the opportunity to do so when it merged with the now-defunct Diamond Bank Plc, considering the fact that even big companies all over the world are feeling the heat wrought by COVID-19.

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The bank noted that there is nothing wrong in restructuring its workforce to meet new challenges as practiced globally, and there is nothing wrong in merging overlapping branches of the bank to achieve cost efficiency.

This is just as there is nothing wrong with an employee resigning his appointment to take up another job opportunity elsewhere.

Access Bank’s records show it is in business for the long term, and will no doubt need its thousands of employees to weather the storm.

Following its merger with Diamond Bank in March 2019, the bank became the largest bank in Nigeria, and Africa’s leading bank by customer base, as it operates through a network of more than 600 branches and service outlets, spanning three continents, 12 countries, and 36 million customers.

Access bank employs 28,000 people in its operations in Nigeria, sub-Saharan Africa, and the United Kingdom, with representative offices in China, Lebanon, India, and the United Arab Emirates (UAE), and with the acquisition of Diamond Bank, had 6,898 permanent staff at the end of 2019.

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The acquisition partly contributed to 31 per cent increase in operating expenses, while personnel, recruitment, and training costs account for more than a third of overheads. According to Access, that period would have been a ‘good time’ for any bank to lay off workers, but it did not.

There is no indication Access is facing distressing times to the extent of cutting 75 per cent of its workforce, considering the bank’s improved performance in its first quarter (Q1) result.

For instance, the bank posted a profit after tax of N40.9billion in its Q1 ended March 31, 2020.

Also, its net interest income was N72.2billion, a 27 per cent increase compared to the N56.8billion recorded in Q1 2019.

The bank’s profit before tax for Q1 2020 stood at N46.2billion, or 2.6 per cent above the N45.1 billion reported year-on-year; while profit after tax dipped by 0.53 per cent to N40.9billion, down from N41.1billion.

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However, the bank incurred N19.6billion in personnel expenses, a 53.5 per cent jump compared to N12.8billion in Q1 2019; while operating expenses rose to N63.5billion, representing a 69.8 per cent increase above N37.4 in Q1 2019.

It is noteworthy that every business must be pragmatic in uncertain times, as the world and corporate organisations are witnessing today. Access Bank’s Group Managing Director/Chief Executive, Herbert Wigwe, had ensured that all employees of Diamond Bank were integrated into Access.

Nevertheless, he understands that the adverse impacts of the COVID-19 pandemic are no illusions and had to lead by example.

Accordingly, at a recent forum, tagged, ‘Employee Town Hall Meeting’, with some staff of the bank, via Microsoft Teams (video), Wigwe said: “We are also looking at a professional cut. I understand that this is very tricky because it comes with pains. I will be the first to take the heat, and I will take the largest pay cut as much as 40 per cent.”

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He added: “Everybody may have to make some adjustments of the sort. We understand the difficulties people are going through, but also understand the higher calling of creating an institution that can continue to provide for us.”

He equally assured that “When things improve tomorrow, we shall revert to normal. We understand the difficulties facing the people, but we have to protect our franchise.”

Furthermore, Wigwe, who had led the bank since 2014, had explained to the concerned public and stakeholders that “At the onset of the COVID-19 pandemic lockdown, we suspended in-branch operations at different locations as directed by the CBN. This is in line with business continuity plans at vulnerable spots; whilst we continue to provide services through our alternative digital platforms.”

Reiterating its statement to the Stock Exchange, Wigwe said: “In line with the phased re-opening of the economy effective May 4, following the Presidential directives, we will be resuming in-branch services in some of our affected branches in a programmed manner to ensure the health and safety of our employees and customers.

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“This is also necessary to provide relevant contingency should there be any incident arising from the pandemic.

“We deny in its entirety the baseless and twisted speculation that the bank is sacking 75 per cent of its workforce. This has made it impossible for many of our outsourced workers to perform duties as usual.”

The bank, however, assured its esteemed stakeholders that it would continue to ensure that its actions and decisions are guided by fairness, justice, equity, and good conscience. Like any other company it has the right to review its operational cost in line with economic realities, especially in the post- COVID-19 era that has already begun to redefine how businesses operate or will operate going forward.

It is worthy of note that since its merger with the defunct Diamond Bank, Access has neither laid-off workers nor closed branches.

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There is no doubt the bank must at some point have to cut branch proximity to reduce cost.

For instance, where Access Bank and defunct Diamond Bank were previously operating in close proximity, sometimes a few yards apart, it is economically wise not to retain the two branches now that the two have become one.

Agreeing, the Chief Research Officer, Investdata Consulting, Ambrose Omordion, affirmed that collapsing branches to one where there are many is a wise decision to manage cost and overcome the effect of this pandemic especially now that e-banking and e-commerce have become the new trend of business.

According to him, this will help manage cost and time, noting that attempt by any bank to restructure or close some branches to cut cost at a time like this, is a strategic decision.
He said Access Bank needed to collapse some of its branches considering the high number of branches acquired post-merger with Diamond Bank.

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Clearly, banking remains a relationship business. For ages, banks have tried to leverage that relationship to grow and maximise shareholder return. Because of emphasis on the long term, Access Bank Group, one of Africa’s largest retail banks by retail customer base with proven risk management and capital management capabilities, apparently may make decisions and weigh trade-offs differently from much of her industry competition. This requires an organisational cultural transformation, especially at banks that have long been driven by traditional metrics.

The bank is first and foremost a business concern that must take decisions based on what it assesses is in its best business interest.

Currently, many financial institutions worldwide are reviewing banking models. Indeed, more recently the CEO of U.K lender, Barclays Bank, said after COVID-19, banking models have changed forever as people get used to working digitally from home, thereby making brick and mortar and big offices models unsustainable, going forward.

In effect, modern banking, amid post- COVID-19 will certainly de-emphasis physical structures and run more on digital templates, platforms and footprints.

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