In line with global best practice, one of the nation’s biggest banks, Access Bank Group, is restructuring into a non-operating financial holding company structure.
The holding company, to be known as Access Holding Company, would serve as the parent company for the banking group (Access Bank and its many subsidiaries). The restructure is being implemented through a Scheme of Arrangement in accordance with the Section 715 of CAMA and the SEC Rules and Regulations. On Thursday, December 16, the bank’s shareholders, in a court-ordered meeting held in Lagos, voted overwhelmingly in support of the Scheme.
The shareholders and directors spoke enthusiastically of the benefits of the restructure and were optimistic that the bank is set on the path of greater growth in the years ahead.
BoardChairman, Dr (Mrs) Ajoritsedere Awosika said the restructured group will have a ‘’structure like that of some major global financial institutions, including those that Access Bank considers to be its peers and competitors’’. Under the new structure which will take off in the New Year, a parent company, Access Holding Company, will hold 100% shares of Access Bank Nigeria and 100% shares of all non-banking subsidiaries of the bank. Access Bank Nigeria will, in turn, own all its banking subsidiaries (15 as at today) and all its three representative offices in India, China and Lebanon.
Dr Awosika says the restructured group will ‘’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 fulfillment in which the HoldCo structure ensures full compliance with 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.
The new structure also facilitates the bank’s growth and expansion across Africa. 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.
Furthermore, the HoldCo structure will facilitate a consolidated financial strength of the Group, which will improve access and ability to raise capital with benefits including lower transaction costs, amidst others. It will also expedite capital and liquidity growth, and provide flexibility to accommodate leverage with minimal risk to regulatory rations.
Finally, this structure would unburden the bank from oversight functions and responsibilities of managing the subsidiaries and ensure the bank is solely focused on its core operations. This fosters decision-making and business growth.
Many shareholders who spoke at the meeting after the Chairman’s speech commended the Board for the new structure which they all agreed would engender greater business opportunities for the group. Dr. Farooq Umar said the HoldCo structure would enhance business diversification and share price appreciation. Another shareholder noted that the new structure will insulate one subsidiary from the other if one underperforms, the others would not be affected. ‘’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’’, she said. In his own remarks, the bank’s Group Managing Director and Chief Executive, Mr Herbert Wigwe thanked 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 of the bank is designed to build a great future for the institution as the bank is spreading from one country to another in different continents. He emphasized that the HoldCo structure is necessary for effective supervision and 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. To this, Mr Wigwe says the benefits of the new structure outweigh whatever costs would be incurred. ‘’I think shareholders should take a long term view of the business’’, he said.
‘’Since 2002, we have become the biggest bank in the country in terms of assets and customer base. In UK, we are one of the best banks there. We are in clearing house in UK. But when we were about to go to UK, there were those who were not enthusiastic about it. Similarly, in the next five years, our presence in South Africa will be equally impactful and successful’’, said the chief executive, referencing the axiom that the days of small beginnings usually grow into leap years in the future. The GMD concluded his remarks with a pledge to continue to support the community in which the bank does business, noting that the renovation of the National Theatre in Lagos would be completed before the end of next year, and the project would create thousands of jobs.