The Nigerian banking landscape has laid bare a harsh truth: the battle inddustry profitability leadership is less that of market share than for core competence leadership.
This is the hard truth the management of Access Holdings is either not comfortable with or unable to live up to . Access Bank’s obsession with acquisitions has delivered to it the laurel of the biggest bank by assets .As of the 2024 financial year, Access Bank’s total assets stood at N41.50 trillion, funded by a combination of sources including N3.76 trillion in total equity, N9.31 trillion in deposits from financial institutions, and N22.53 trillion in customer deposits, along with other funding sources. This significant resource base underscores the bank’s substantial financial capacity when compared with few top banks in that industry.
The above humongous volume of assets, indeed, placed Access Bank above other tier 1 banks with a big gap between it and other players . Zenith Bank another tier 1 had a Total Assets were N29.958 trillion while Guaranty Trust Bank had a Total Assets stood at. N14.796 trillion within the same financial year . This indicates the combined assets of both GTCO and zenith are just slightly above those of Access bank.
But this has come at a very harsh cost too: miserable profit figure .With only 13 percent of N4.9trn revenue made converted to profit after tax in its 2024 financial year , poor valuation and low shareholders yield ., Access Bank , the biggest in Nigeria with N41trn assets , is a paradox of plenty that continues to worry its shareholders.
Realities on ground in the last few years should have confirmed to Access Bank that performance is more about resourcefulness and not resources perse . Access Holdings Plc in its 2024 full-year , reported a pre-tax profit of N867. 019 billion, up from N729. 001 billion a year earlier ; it also reported a profit after tax of N642.22 billion for the 2024 financial year. This represents a 3.7% increase compared to the N619.32 billion recorded in the previous year. To the ignorant observers ,this is a wonderful achievement. No , that is not true, particularly when compared with banks with smaller assets like GTCO or Zenith Bank.
But Guaranty Trust Bank (GTCO) and Zenith Bank have taught Access Bank leadership a big lesson .They masterfully leveraged their resources to deliver stellar performance, Access Bank’s fixation on inorganic growth through acquisitions has left it lagging behind. The numbers don’t lie – GTCO and Zenith Bank’s strategic prowess has yielded remarkable results, exposing Accees Bank’s flawed approach
Access Bank profit becomes miserable relative the what GTCO with extremely smaller assets, customer deposit , loans and advances and gross earnings recorded during the period . At the year 2024, Guaranty Trust Holding Company Plc (GTCO) reported a profit before tax of ₦1.266 trillion and a profit after tax of ₦1.018 trillion. This represents a significant increase from the previous year’s profit before tax of ₦609.3 billion and profit after tax of ₦539.7 billion at the end of the 2023 financial year. Zenith Bank’s profit before tax was N1.33 trillion and its profit after tax was N1.03 trillion also confirmed Access Bank poor performance ,
Ironically, Access Bank saw a significant increase in gross earnings, rising to N4.878 trillion from N2.594 trillion in the previous year. the 2024 financial year . The closest earnings to Access Bank’s is Zenith Bank’s. Zenith Bank’s which surged by 86% to N3.97 trillion . Guaranty Trust Holding Company Plc (GTCO) gross earnings of N2.15 trillion at the end of 2024 more than ever exposed Access Bank as a weakling
| **Bank** | **Total Assets (Trn)** | **Gross Earnings (Trn)** | **Profit After Tax (B)** |
| ——– | ———————- | ———————— | ———————— |
| Access Bank | N41 | N4.9 | N642b |
| GTB | N14.8 | N2.15 | N1.01trn (N1,010b) |
| Zenith Bank | N30 | N3.97 | N1.03trn (N1,030b) |
The question then is : what is wrong .The above thinking is not unusual as some companies judge their capacity for growth more by the strength of their balance sheet than by the strength of their development efforts . For Access Bank , mergers and acquisitions are all common methods for achieving growth than the principal alternative of ‘organic’ development, or the pursuit of a strategy relying on a company’s own resources . The bank embarked on upon these to achieve that goal . In other words ,no doubt , Access Bank unusually relied on big, bold acquisitions for corporate regeneration.
However , the above thinking may be very dangerous . In the reality , the real differentiator lies in the ability to leverage resources effectively, not just accumulate them.
This may not be farfetched. As potentially useful as they may be, acquisitions are not good substitutes for industry foresight. Analysts believed acquisition could an albatross as well. To them , those corporate leaders that adopt it as a growth strategy , often see it as the only escape route from a business that has become hopelessly mature.
It may be difficult to fault the above view . It’s not news to anyone that few acquisitions actually benefit the shareholders of the acquiring company, yet acquisitions are, in many cases, an easy out for senior executives too intellectually lazy to think through the future of the firm’s “core” business and too unimaginative to discover new ways of deploying existing capabilities. In some companies acquisitions help managers cover up their anemic growth .in the core business. .Dozens of academic studies have shown that acquisitions destroy shareholder wealth more often than they create it .
The above perspective overlooks a crucial aspect: true success lies in building competencies that drive superior performance. To get to the future first, top management must either see opportunities not seen by other top teams or must be able to exploit opportunities, by virtue of preemptive and consistent capability-building, that other companies can’t ; banks must excel in key skills in all income-generating areas.In the competitive banking landscape, building competencies is essential for superior performance.
A look into the income of Access Bank relative to its peers confirm the above views . When a bank excels in generating incomes from the core banking , fees and commissions, and trading , the three core income streams , it can outperform rivals and achieve long-term success. But to do that , rather than focusing solely on market share, banks should prioritize developing expertise in those areas to drive sustainable growth and profitability. By doing so, they will be well-equipped to navigate the complexities of the banking industry and emerge as true leaders.
Don’t get it wrong , there is no crime in adopting acquisition as a strategic choice to grow a bank provided it is backed commensurate and relevant skills capable of enabling it to outperform competition . A look into the banking income mix and the performance of Access Bank relative to its competitors is the only way to ascertain its capability
ITS INCOME MIX TELL THE STORY BETTER .
CORE BANKING .
Bank management becomes coterminous with risk management ; it is no more than managing risks—the risk of mismatches between assets and liabilities and between borrowing and lending rates. In the period under review , interest income, which is money the bank earns from loans and other investments, remained the main source of Access Bank earnings, making up 71% of the group’s gross earnings for the year. That is a 12% increase from 2023, showing that the bank stayed focused on its core business. A closer look at where this interest income came from shows: About 51% came from loans it gave to customers and other banks. 47% came from investments in securities (like government and corporate bonds). The rest, just under 2%, came from cash balances, which, although small, grew by almost 1,000% during the year.
However , whether a player will win a profitability battle is usually exposed by how savvy every player’s is in effectively generating the Net Interest Income (NII), a critical component of a bank’s revenue stream, generated from lending activities and interest-bearing assets. The key challenge is that NII is sensitive to both credit risk and market risk, particularly interest-rate risk
Access Bank won the interest rate battle but at an excessively high cost that rubbished the bottom line . While the bank made more money from lending, it also spent more to attract and keep deposits.Most of its interest expenses, over 88%, were from paying interest on customer deposits and from other financial institutions. In fact, deposits from customers rose by N12 trillion (61%) to reach nearly N32 trillion. This helped the bank grow its balance sheet but also meant it had to pay more interest to depositors.
In the period under review, Access Bank grew its net interest income by 84% to N1.26 trillion, which is impressive and shows that it earned more from loans and investments than it paid out in deposit interest. However, Access Bank only won both the battles for interest rate and credit risks , it was at a great cost against the bottom line. At the end of the day, Access spent 63.5% of its interest income just to cover interest expenses as against 21percent of GTCO . The bank also had to set aside a bigger amount for loan losses, about N245 billion, up from N140 billion the previous year, set aside as impairment charges mostly for loans to customers that might not be repaid and for investments that had lost value within the same period.
Fee income
Fee income, earned through service provision, offers a more stable revenue stream. Unlike trading income or NII, fee income is less volatile and not susceptible to market risk. Moreover, fees are often paid upfront, eliminating credit risk. By offering a range of services, banks can build a diversified customer base and reduce dependence on volatile income sources.
Access Bank also earned money from other sources, such as fees on services .But in 2024, these made up a smaller portion of gross earnings compared to 2023: Fees and commission income contributed 10.5% of gross earnings. Even though these were lower as a percentage of gross earnings, the actual figures still grew. For example:The bank earned N162 billion in credit-related fees, more than 60% higher than in 2023.It also earned N59.8 billion from account maintenance fees, up by 87%.
Trading
Trading income, generated through financial products like equities, bonds, and derivatives, is the most volatile income source for banks. While it offers potential for high returns, trading income carries significant market risk and credit risk. To manage this risk, many banks employ the value-at-risk (VaR) methodology, which provides a statistical measure of expected losses under specific market scenarios. Access Bank’s gains from foreign exchange and financial instruments was less impressive as income from here backtracked . Fair value and FX gains contributed 8.5%.Fair value and foreign exchange gain/(loss) hit 415,804 in 2023 down from 628,931 in 2023 /Other operating income hit 459,131 against , 33,074 with N326187 from asset disposal alone .
Cost to Income
In 2024, Access Holdings’ cost-to-income ratio (CIR) was 58.3%, an increase from 46.9% in 2023. This ratio measures operating expenses as a percentage of gross earnings. While the CIR increased, Access Holdings still delivered strong financial results, with a 88% year-on-year growth in gross earnings, rising from N2.594 trillion in 2023 to N4.878 trillion in 2024. In its 2024 full-year results, Guaranty Trust Holding Company Plc (GTCO) reported a cost-to-income ratio of 24.1%. This figure indicates that for every N100 of income generated, the bank incurred N24.1
LEADERSHIP IS THE ISSUE
The inability of Access Bank to justify its asset and earning leadership by translating them to profitability leadership exposes the quality of leaders . People are at the heart of strategy .The knowledge and experience of people can be the key factors enabling the success of strategies .But they can also hinder the adoption of new strategies too .Human resources may hinder strategy if they are not tailored to the types of strategies being pursued . Where strategies are built around high rates of innovation in products or services bureaucratic recruitment procedures may deter entry of creative individuals.
One lesson its leaders must learn from both Zenith Bank and GTCO is that possession of resources does not guarantee strategic success. This is because strategic capability is essentially concerned with how these resources are deployed, managed ,controlled and in the case of people motivated to create competencies in those activities and business processes needed to run the business. The concept of core competencies goes beyond mere accumulation of resources, Access leadership must earch for those few activities that underpin competitive advantage or demonstrate excellence.
Whether a company adopts organic or inorganic strategy to grow its assets , the battle for an industry leadership is usually won or lost in a three stage overlapping battles.
Where and How Industry Leadership is Won
The first stage of competition is about gaining industry foresight and intellectual leadership, where companies compete to be prescient about the size and shape of tomorrow’s opportunities.
This stage involves conceiving fundamentally new types of customer benefits or radically new ways of delivering existing customer benefits. It’s about imagining the future and developing a deep understanding of the trends and discontinuities that could be used to transform industry boundaries and create new competitive space. Companies that excel in this stage are able to think outside the box and envision new possibilities that others may overlook.
The second stage of competition is about shaping the emergence of the future industry structure to one’s own advantage. This involves accumulating necessary competencies, testing and proving out alternate product and service concepts, attracting coalition partners, and constructing the necessary infrastructure. It’s a critical stage where companies must actively shape the direction of industry development and influence the path forward. By doing so, companies can position themselves for success and create opportunities for growth.
The final stage of competition is about market position and market share, where competition shifts to a battle for dominance within well-defined parameters of value, cost, price, and service. Innovation is focused on product line extensions, efficiency improvement, and marginal gains in product or service differentiation. While this stage is critical for short-term success, companies that focus solely on market share and neglect the earlier stages of competition may find themselves struggling to stay ahead of the curve.
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