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Access Bank: Strengthening for the Future

Financial institutions have been the cynosure of all eyes since the outbreak of the COVID-19 which ravaged the global economy.

As the pandemic continues to rage, analysts believe that to be successful and maintain their market share, financial institutions need to build enough buffers to be able to embrace emerging technology, adopt evolving business models and meet all their customers’ needs.

Faced with changing business environment as well as changing consumer expectations, Access Bank is not resting on its oars as it continues to take steps to strengthen its capital so as to remain a dominant lender in Nigeria as well as the continent.

The bank last week announced that it had successful issued additional $500 million tier-1 Eurobond. This came less than two weeks after the bank successfully issued a $500 million Eurobond, bringing the total amount raised by the bank to N1 billion.

The commercial bank with presence in 11 African countries, Europe, Middle East and Asia, announced the fresh capital raising in a statement that was signed by its Company Secretary, Sunday Ekwochi.

It explained that the offering achieved a pricing of 9.125 per cent yield and coupon and was oversubscribed by two times it order book which peaked at over $1 billion.

According to the bank, the additional tier 1 Eurobond which was issued under its medium term note programme was a, “Basel III compliant perpetual non-call 5.25-year subordinated Note to be listed on the London Stock Exchange.”

It added: “The Eurobond may be called anytime from October 7, 2026, subject to conditions including the Central Bank of Nigeria’s approval.”

Commenting on the transaction, the Group Managing Director of the bank, Dr. Herbert Wigwe stated: “At Access Bank, we remain fully committed to the execution of our vision to become the ‘World’s Most Respected African Bank.”

According to Wigwe, the success of the transaction, which he said was the first in the Nigerian banking industry and the first of its kind in Africa outside of South Africa, would significantly enhance the bank’s tier 1 and total capital ratios ahead of Basel III implementation in Nigeria.

Additionally, the bank boss said the fresh capital would provide room for significant growth through ongoing execution of the bank’s strategic objectives.

“In particular, it follows our recently announced Group reorganisation which is aimed at capturing the strategic opportunities in payments, agency banking, and insurance across the continent which we expect will further enhance the growth profile and diversification of our business.

“Our growth and diversification strategy is also underlined by the recent expansion of our regional footprint where we continue to monitor opportunities. “This additional tier 1 Eurobond issuance, following our recently concluded $500 million Senior Unsecured Eurobond, underscores the formidable confidence of a diversified range of global and local investors in the bank’s strategy”.

Citigroup, JP Morgan, Mashreqbank and Renaissance Capital acted as Joint Bookrunners on the transaction; and Chapel Hill Denham and Coronation Merchant Bank acted as Financial Advisers and Joint Bookrunners.

Indeed, following the devastating impact of the COVID-19 on economies in the world, a growing number of proactive financial institutions are turning to the debt market to strengthen their balance sheets. Also, the urge for the international debt market is buoyed by the need for banks to position for big ticket transactions, especially in a country like Nigeria that has wide infrastructure deficit.

Nigeria is a loan market and investors have been tapping into treasury bills and bonds issued by the country for a very long time. Additionally, the country remains a growing investment destination, attracting capital equity and debt investors, notwithstanding security and political risks that beclouds its outlook.

Traditionally, commercial banks have short-term deposits. So, if they want to lend long-term, if they use their current stock of dollar, it would be a mismatch. So, they try to lengthen the amount of liquidity they have by issuing debt instruments such as Eurobond.

“Remember, you can’t go to the international capital market without meeting very high standards of governance, which is why Access Bank must be commended,” a source said.

In its assessment of the recent Eurobond issuance by the bank, the International Financial Review(IFR), noted that Access Bank, “scored something of a triumph for itself when it became the first Nigerian lender to issue AT1 debt.”

According to the report, while Central and Eastern Europe Middle East and Africa (CEEMEA) issuers sat on the sidelines hoping for a better market tone, Access Bank’s management held its nerve, deciding there was little to be gained from waiting.

“There wasn’t any benefit from waiting for a better window,” the IFR quoted a source at the bank to have said.

“We had gone through a marketing period. We had got specific feedback. There’s still a lot of supply waiting to hit the market. I don’t think holding off would have been best,”

That call proved to be on the money, even though no one could be sure how the session for financial markets would pan out.

Those away from the unrated deal, though, also supported the decision to go ahead.

“This is a very rarefied part of the market. I think it will go well,” said one banker away after books had opened.

“His view turned out to be correct. After opening books at 9.5% area, leads were able to launch a $500 million perpetual non-call 5.25-year bond at 9.125%. The book at guidance was $1 billion, with the bond’s size at the top end of that targeted.

“It’s a pretty impressive book in this market, as they still managed to tighten prices aggressively,” said one investor.

Given the yield on offer, one thing in Access Bank’s favour was that it was less likely to become caught up in any rates volatility. “It’s well insulated from rates,” said a second lead.

Even so, given the poor performance of recent AT1s, albeit from very different credits issuing at very different yields, it was still a big decision to go ahead. Some investors are sitting on their hands given the fickle nature of markets.

According to the review, the bank managed to get a broad buyer base, including some accounts that bought its $500 million 2026 senior bond at 6.125% just two weeks before. Others, though, were solely buyers of this AT1.

“Investors included real money and hedge fund accounts from various parts of the world, including the UK, Asia and the Middle East.

“Access is top-tier bank in Nigeria. Africa is well liked,” said the first lead.

Despite the tougher market backdrop, the Access Bank trade showed that investors are still willing to engage in deals, especially as the emerging market asset class’s performance has been relatively poor this year.

September was one of the worst performing months for JP Morgan’s EMBI GD, which tracks the performance of hard currency bonds for sovereigns, since 2014.

The banker away expects one or two more niche AT1 trades from the CEEMEA region before the end of the year.

“The hunt for yield is definitely on and people are wandering off piste to get it,” he said.

Wigwe had said across Africa, there are opportunities for the bank to expand to high-potential markets, leveraging the benefits of the African Continental Free Trade Area agreement (AfCFTA). He had said AfCFTA, among other benefits, would expand intra-Africa trade and provide real opportunities for Africa.

According to Wigwe, across Africa, there is an opportunity for the bank to expand to high-potential markets, leveraging the benefits of AfCFTA. He said AfCFTA, among other benefits, would expand intra-Africa trade and provide real opportunities for Africa.

He stated that the plan is for the bank to establish its presence in 22 African countries as well as some strategic locations outside the continent so as to diversify its earnings and take advantage of growth opportunities in Africa.

According to him, Africa has enormous potential and there are opportunities for an African bank that is well run, that understands compliance and has the capacity to support trade and the right technology infrastructure to support payments and remittances, without taking incremental risks.

“We believe that we are best positioned to basically do all of that. Our focus is to become an aggregator in Africa and we are building a global payment gateway and providing trade finance support and correspondent banking across the continent. We are focusing on the key markets.

“The approach would always be that in the country we wish to go to, that we have the right skills. We would not just be a drop in the country in which we are present, we would make sure that we have an impactful presence in each of the major countries in which we are present.

“In doing this, we are also mindful of the country we are going to so as to make sure that it is of benefit to the bank. As we do this, we are working with our friends and partners.

Clearly, with all these, Access Bank is positioning itself to become Africa’s gateway to the world and has strengthened its capital to support trade and payments across the continent.

Source: Thisdaylive

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