The move by Access Bank Plc to expand its foray across other African countries through a series of acquisitions of smaller banks is seen to have huge implications for the banking sector of Africa’s biggest economy.
In a letter sent to BusinessDay, Access Bank announced last Friday it has finalised an agreement to buy Standard Chartered’s subsidiaries in Angola, Cameroon, The Gambia, Sierra Leone, as well as its consumer, private and business banking business in Tanzania.
The move is expected to expand the territory of Nigeria’s biggest financial services group in the African continent, where it has already ventured into strategic markets including Angola, South Africa, Botswana, and Zambia in addition to Mozambique.
“This strategic transaction represents a key step in its journey to build a strong global franchise focused on serving as a gateway for payments, investment, and trade within Africa and between Africa and the rest of the world, anchored by a robust capital base; a relentless focus on execution; and best-in-class customer service & governance structures,” Roosevelt Ogbonna, group managing director, Access Bank, said.
“Our five-year growth plan will see us build a world-class class payments gateway leveraging the power of technology and a robust network of relationships across our operating countries,” Ogbonna added.
Findings by BusinessDay showed that even if the pace and pattern of continental expansion by different Nigerian banks vary, moving into other African markets allows for the diversification of assets and balances profitability against results in Nigeria.
“Although we expect this expansion to improve the diversification and stability of the bank’s revenues, it could also increase its risk profile (especially operational and regulatory risks) in the medium term,” Luqman Agboola, head of research at Sofidam Capital, said.
“The move will allow banks to grow their network base and leverage the opportunities presented by the African Continental Free Trade Area to extend their reach across the continent,” he added.
Last week, Access Bank got the nod of the Central Bank of Angola, Banco Nacional de Angola for the acquisition of a majority equity stake in Finibanco Angola S.A., having earlier got the approval of the Central Bank of Nigeria.
This was revealed in a notice filed on the Nigerian Exchange Limited on Thursday.
Apart from Access Bank, UBA is another large Nigerian bank with a strong presence in Africa. The bank has operations in 20 African countries. Guaranty Trust Holding Company Plc (GTCO) also boasts subsidiaries in nine African countries.
According to Israel Odubola, a Lagos-based research analyst, Nigerian banks have been able to leverage their technology and expertise to offer innovative financial products and services to customers across Africa.
“For example, some of the banks have invested in fintech subsidiaries that reach a large number of customers across Africa,” Odubola said.
He noted that the Access Bank’s foray into the African market will allow Nigerian banks compete with Kenya and South African peers in terms of how much profit they generated with their shareholders’ equity.
Read also: Access Bank to acquire Standard Chartered’s subsidiaries in five African countries
Data compiled by BusinessDay showed Nigerian banks recorded an average return on equity (ROE) of 16.50 percent in 2022, lagging behind South African and Kenya peers of 27 percent and 28.90 percent respectively.
ROE is a metric that measures a bank’s profitability by revealing how much profit a bank generates with the money shareholders have invested.
Further findings showed Equity Group Holdings (a Kenyan bank) led its African peers with a ROE of 27.6 percent by the end of 2022. In second place was Capitec from South Africa with a ROE of 26 percent.
GTCO, a Nigerian bank, secured the third position with a ROE of 23.61 percent, while Barclays Bank of Kenya ranked fourth with an ROE of 22.9 percent.
