Expectations as Access Bank eyes holding coy structure

Like Guaranty Trust Bank, Access Bank Plc which is Nigeria’s biggest lender by customer base and total asset has adopted the holding company (HoldCo) structure.

At the end of its recent court-ordered meeting, the bank opted to adopt the name Access Holding Plc, thus implying that shareholders of Access Bank Plc would be issued new shares of Access Holdings Plc, as the former would be delisted from the Premium Board and replaced by the latter.

The non-operating holding company will in the immediate include two broad areas: Access Bank Nigeria, and its non-banking subsidiaries. 

Access Bank Nigeria will continue to hold investments in its core-banking subsidiaries outside Nigeria whilst the non-banking arm will hold direct and indirect equity interest in entities such as Access Insurance Brokers Ltd, The Payment Services Company Ltd and Grow Microfinance Ltd.

The transition to a HoldCo structure by the bank raises key issues like, with the increasing adoption of HoldCos by banks, they are technically reversing to the universal banking model, prohibited a decade ago due to undue abuse.

More so as GTBank and Access, which were earlier critical of the HoldCo structure transit join the trend, one may expect to see other peers, like UBA and Zenith Bank adopt the model.

The CEOs of FCMB, GTBank, and Access made the transition, and even so the leadership of UBA and Zenith may not be deeply rooted from an ownership perspective. It is not unlikely to see these institutions thread similar paths if the core shareholders are satisfied with the performance and loyalty of the CEO.

As it stands, the HoldCo structure seems to be a sit-tight model being adopted by Nigerian banks’ leadership, as management and board seek to retain full control.

Besides, it gives an opportunity to consolidate non-banking interests, especially as Nigerian banks may be back to the size competition.

The question is, what is the benefit of this HoldCo structure for minority shareholders, who many a time just approve resolutions presented at General Meetings, including those ordered by the court because they have little or no option since majority shareholders have used their bloc votes to veto preferred resolutions?

First, the HoldCo structure brings an additional layer of operating cost, with little or no direct revenue benefits. Nonetheless, there are indirect benefits in terms of the opportunity for the HoldCo to invest and give shareholders exposure to non-banking activities, which may create value for shareholders beyond the cost.

For customers of Access Bank, the new structure brings the benefit of expanded scope of offerings, as the bank may now offer a full range of services to its growing customer base, which may enjoy services beyond just banking.

So, it’s a good time for the bank’s customers, as they would now be able to do beyond banking with Access Holdings Plc, which would bring to them over time new financial services beyond banking.