No doubt , Access Bank’s acquisition drive is speedily enhancing its chances of achieving its leadership dream . In scope and breath ,the bank has changed dramatically .With its spate acquisitions Access Bank is becoming well diversified as it is speedily operating in different markets with multiple SBUs with their own strategies for their specific markets
The reason for the above view may not be far to seek .Leveraging on its acquisition initiatve , the bank has continued to exploit the advantages of potentially value-creating drivers for diversification, exploiting economies of scope by extending the scope of the organisation’s activities and gaining efficiency by applying the organisation’s existing resources or capabilities to new markets or services; it is equally stretching corporate management capabilities by applying the skills of talented corporate-level managers or ‘corporate parenting skills to new businesses and increasing market power since diversifications in many markets increase the market power vis-à-vis competitors.
This is more so as having a diversified range of businesses increases the power to cross-subsidize one business from the profits of the others .
Figures from its financial books confirm the above view as much .Going by its 2022 full year results declared by the bank, its total assets hit approximately N15trilion , making it the biggest bank in Nigeria .Also ,its deposits from both the financial institutions and customers inched up above N11trilions to give it a lead in the industry and to confirm high confidence reposed on it by customers while its total revenue within the same period was N1.4 trillion ranking it above its peers in 2022 and confirms the capability of its money making machine
But despite the above feat , some critics of Access Bank’s acquisitive drive appear to be blind to the above exploits of the bank . To them the growth in organizational size or revenue, deposits or assets is rarely a good enough reason for acquisition on its own .Growth in deposit, assets size and revenue ,to them , must not be only profitable , it must deliver better value for money . They believed its growth is merely a form of ‘empire building’ .
The above argument , no doubt , is true. This is particularly so because smallness without stretch and leverage is impotence just as bigness without stretch and leverage is obesity .What is the essence of having the biggest revenue ,assets and deposit without translating them to the biggest profit in the real sense of it ?
The critics are, no doubt, anchoring the above argument on Access Bank’s profitability relative to the above exploits and its rivals . The bank’s Profit from continuing operations declined to N155.87b in 2022 financial year from N160 b in 2021.
However , Access Bank is not oblivious of this fact too .The bank from all indications , is combining growth in those areas such as assets ,deposits and revenue with high profitability. To an insider, the critics of Access Bank are nothing but disingenuous. First , everybody who is knowledgeable about acquisition knows high cost and integration are the major debacles battled by any acquirer . Moreover , he noted that Access Bank’s full year results for 2022 for instance should not be used as a yardstick to benchmark it with its rivals in isolation without the circumstance surrounding it .He explained that the bank’s profit backtracked due to a one off huge provision made on its exposure in Ghana Eurobond . Without this provision Access Bank ,he said ,the would have netted above N250b as its profit after tax .
The above argument may not be farfetched . One observation that cannot be disputed is that without this circumstantial provision the bank could have been few steps behind Zenith Bank, the bank with the biggest profit in the industry and could have consequently overtaken Guaranty Trust Bank ,First Bank and UBA . Even with this circumstance, sound and knowledgeable analysts rarely consider one off circumstance ,whether positive or negative, extraordinary if it is not sustainable .
Moreover , Access Bank was not the only victim .As at December 31, 2022, Nigerian banks with subsidiaries across Africa had direct and indirect Ghana Eurobond holdings of about N800 billion ($1.7 billion) .This accounted for an estimated 4 per cent of the Industry’s total investment securities and this led to significant losses of at least N284 billion from some investments in Ghanaian bonds crisis .
The affected Nigerian banks recorded impairment charges on the bond, varying from 10% to 59% of the outstanding value of their respective investments .Access Bank was the worst hit and consequently, it made the biggest impairment loss of about N103 billion . . However , the provision may not be sustainable once the issue is resolved and normalcy returned to that market .
Asides the Ghana’s Eurobond saga highlighted above ,the challenges associated with acquisitions highlighted above as opposed to organic approach are known to be equally impacting enormously on the competitiveness of its profitability ; what is delaying Access Bank’s drive to combine profitability leadership relative to its size leadership in terms assets, deposit and revenue is what makes acquisition less attractive option to its rivals , and this has to do with toxic loans inherited from the entities acquired as well as the heavy cost outlay prompted by acquisitions .
Access Bank had been confronted with the asset quality crisis and high operating expenses inherited mostly from its acquired entities in the last few years .These had led to higher cost to income ratio and provisions for bad loans that consequently keep its profit lower and non performing loan ratio higher relative to its few rivals
But this scenario is becoming a thing of the past . The bank has remained very proactive tackling the issues of the cost debacle and poor asset quality, the potential evil twins of acquisition . Its cost to income and non performing loan ratios have both been on downward trends in the last few years . For instance its non performing loan ratios improved from 4.3% , 4.0% and 3.7% between half year 2020 to 2022 respectively .
This achievement may not be farfetched. Access Bank has not only continued to create strategic fit between the opportunity in the environment and its resources but adopting resource stretch and leverage which consequently provide the energy and rationale for proactive advantage building competences and industry re-engineering ; it is creating the capability for resource leverage to beat the sprawling cost of acquisitions to demonstrate that it is possible to do more with less.
BEHIND ACCESS BANK’S ACQUISITION DRIVEN PERFORMANCE .
Contrary to the belief of some critics, the outstanding and speedy performance could not only be traced to its spate of acquisitions and mere foresight in the last few years but its ability to outperform its competitors in all critical stages of the race to the future leadership. .
Apart from the battle for the intellectual leadership prompted by foresight and dream for the industry leadership , the key determinants of which company emerges as an industry leader are the capabilities to foreshorten migration paths and influence the direction of industry development as well as gaining upper hands in the battle for market position and market share.
Access Bank has continued to display its unique dexterity in all the above stages rather than solely on its acquisition spree. .While there is no doubt that the bank has palpably gained a deeper understanding in terms of the trends and discontinuities , become be prescient about the size and shape of tomorrow’s opportunities and equally conceived fundamentally new types of customer benefits and radically new ways of delivering existing customer benefits of which the overall goal is to out-think and out-imagine competitors , it is equally battling hard to influence the direction of industry development of which the race is to accumulate necessary competencies, to test and prove out alternate product and service concepts , to attract coalition partners who have critical complementary resources, to construct whatever product or service delivery infrastructure may be required, and to get agreement around competitive standards. By this ,it is actively shaping the emergence of the future industry structure to its own advantage.
While the bank is not relenting in the above areas of competition in the race to the future industry leadership , ,like other players , it is not equally toying with product line extensions, efficiency improvement, and what are usually marginal gains in product or service differentiation at the market level relative to its competitors
Clinching tenaciously to its vision or foresight for an all round leadership and with the current leadership in the above areas driven largely by its acquisition spree, Access Bank is still busy rebuilding its profit engine which encompasses its deep-seated beliefs about what business it is in, what it is delivering to customers, how money is made in this business, what assets and skills are critical, and who its competitors are.
The reason for the above initiative is simple . For a successful firm, the definition of served market, the value proposition put forward to customers, the margin and value-added structure, the particular configuration of assets and skills that yields those margins, and supporting administrative systems together constitute an integral and well-tuned profit “engine” and all are needed to be reviewed and updated
It is equally battling and improving its capability for corporate regeneration ,particularly with the banking industry that is under heated competition as well as dynamic forces of macroeconomic elements and regulatory policies .No doubt , changes in any environment typically threaten the engine’s efficiency just as a threat to a firm’s profit engine may come from improvements made by a competitor to a particular component of that engine .Also , over time , new, more efficient profit engines make older engines obsolete
In the final analysis ,the most exciting observation in the battle for the industry leadership in the Nigerian banking is that every aspirant is laying one claim or the other the leadership in one area or the other, Sequel to this every player is trying to upturn its current strategic position , trying to fundamentally re-conceiving itself, regenerating its core strategies and of reinventing its industry. No doubt , , Access Bank has proved it is capable of getting different ; it is creating new businesses, reinventing its very concept of self its channels, processes, customers , criteria for promoting managers metrics for measuring success and so on to maintain its current exploits and outperform .competition . The ultimate target of every player is the overall struggle is to become the most profitable in every sense of it .For Access Bank the hope is very much bright
