By Audrey Lotchukwu
MON 26 APRIL, 2021-theGBJournal- ‘’We expect that African subsidiaries will reach around 20% of the group’s total assets in the next three to five years, from 7% as of September 2020,’’ says Moody’s while analysing Access Bank’s recent plan to acquire of 78.15% stake in BancABC Botswana for a cash in their latest Credit outlook.
Moody’s added, ‘’following a number of acquisitions over the past 24 months to expand its footprint in Africa, we anticipate that Access will continue to seek growth opportunities via acquisitions over the coming years, both to reduce its reliance on the challenging Nigerian market and to expand its presence in key African markets to be a trade and payment gateway into and throughout Africa.’’
On 19 April, Nigeria-based Access Bank Plc (B2/B2 negative, b31) announced that it had entered a definitive and binding agreement with ABC Holdings Limited, a subsidiary of Atlas Mara Limited, to buy a majority stake in Botswana-based African Banking Corporation of Botswana Limited (BancABC Botswana).
‘’The proposed acquisition is credit positive for Access because it will support its franchise and profitability without materially affecting its asset quality or capital buffers, and contribute to the bank’s diversification strategy,’’ says Moody’s.
The transaction is small relative to Access Bank’s size, with BancABC Botswana’s balance sheet of $858 million as of December 2019 (latest available data), representing only 3.8% of Access’ $22.4 billion in assets as of December 2020.’’
Access will acquire ABC Holdings’ 78.15% stake in BancABC Botswana for a cash consideration representing approximately 1.13x book value, including a deferred portion payable 24 months after the transaction’s close, subject to certain conditions.
Acquiring 78.15% of BancABC Botswana, which is expected to be concluded during the second quarter of the year, comes a month after Access acquired SouthAfrica based Grobank Limited.
According to the latest available data before the coronavirus pandemic, BancABC Botswana had a relatively sound financial profile, with a nonperforming loan (NPL) ratio as of December 2019 of 5.2% and a Tier 1 capital ratio of 15.1%.
Moody’s said; because Access’ NPL ratio was 5.8% as of December 2019 (4.8% as of December 2020), and its Tier 1 capital ratio was 14.2% (15.1% as of December 2020), we do not expect the acquisition will negatively affect Access’ asset quality and capital buffers.
BancABC Botswana, which is predominantly a retail bank, was profitable in 2019, with a ratio of net income to total assets of 1.3%.
BancABC Botswana is the fifth-largest bank in Botswana by assets and had a 9.4% market share by banking system assets and a 10.2% share of total system loans as of December 2019. Its significant presence in Botswana will provide Access with a solid footing in the country, allowing it to further diversify its revenue sources outside Nigeria. Nigeria’s operating environment is challenging and Access’ continued growth outside its main operating country offers it the benefits of international diversification.
The acquisition also will support Access’ strategy to be an aggregator of cross-border transactions across, from and into Africa, including international payments and remittances, trade finance transactions and correspondent banking. Access aims to capture and support the business flows of large Nigerian corporates into key African markets, as well as the flows from large foreign corporates into Nigeria.
Access has pan-African operations, with subsidiaries and clients in Ghana, Democratic Republic of Congo, Zambia, Rwanda, Gambia, Sierra Leone, Cameroon, Kenya, Mozambique and South Africa. Additionally, it is also present in the United Kingdom.
Access Bank’s geographical breakdown by assets Data as of December 2020
Country Total assets, NGM millions % of group assets
Nigeria 7,130,596 82.2%
UK 911,695 10.5%
Ghana 379,131 4.4%
Congo 73,055 0.8%
Rwanda 55,880 0.6%
Zambia 38,391 0.4%
Kenya 34,906 0.4%
Gambia 23,648 0.3%
Mozambique 14,008 0.2%
Sierra Leone 12,997 0.1%
Guinea 5,441 0.1%
Source: Access Bank annual report