How has your bank managed the effect of the COVID-19 pandemic on its operations since the outbreak of the virus?
It is evident that the pandemic has affected operations of businesses not just in the banking industry but across all the sectors of the economy.
It has had significant effect on how we have done business. Prior to our merger with Diamond Bank, we made a lot of investment in information technology, training and innovation. This pandemic has given us an opportunity to test the innovation and resilience of that investment made over the course of two years.
You would recall that the restrictions meant banks had to prioritise branch openings, but we still needed to serve customers. We had to rely on our digital platforms to be able to do so. As you may well know, we have the largest mobile banking network within the Nigerian banking system, with our 11 million customers on mobile banking app, we needed to upgrade that service and make it a lot more user friendly. A friendly digital platform has made it easy for customers to interact and achieve their banking needs. Overall, the operations were impacted but it might interest you to know that as a bank, we have grown through the crisis. In all of the last four to five months the bank has continued to grow, we continue to sign on new customers and leverage our agency banking to allow customers do business within their own locality rather than traveling far to do so. This would be the new normal. As we go into the future, more customers will rely on the digital platforms and alternative channels to be able to continue their transactions and do business. We are ready to serve customers and help them through that journey to arrive at a place where it will be very profitable.
Are you impressed about how the pandemic has been tackled so far?
I think to a large extent I don’t know if it is the work that we have done that has limited the impact of COVID in Nigeria, or we are just lucky or as some will argue that the weather itself has played a significant role. But whatever it is, government initiative and a quick thinking of the federal and state governments in Lagos, Ogun and Kano helped limit the transmission of COVID-19 across the market. We played our role, working as a partnership under CA-COVID with several large corporates within this market to provide funding and financing. We want government to realise that it is not just their fight, it is our fight and collectively we can win. The investment which CA-COVID has done in purchasing equipment, setting up testing centres and rehabilitation centres was to show support to government as well as Nigerians that it is all not just about making money but about making an impact. For us, it was important to protect our staff, our customers and entire stakeholders including the general public. I thank the government in the work that they have done and the Nigerian Centre for Disease Control (NCDC), in taking clear initiative that helped limit the spread. You rightly pointed out that, the graph is going down, and we pray it continues that way.
How has your bank been able to thrive in the face of central bank’s policies such as the cash reserve ratio (CRR) hike that has taken so much deposits away from banks’ balance sheets?
Well I think in times like this, these are normal things that banks have to be prepared for. I don’t think there is any single bank that will tell you that this is news to them or this is the first time they will see things like this happening. The monetary policy authority will try the best it can to manage local currency liquidity, foreign exchange liquidity, and of course the stability of our currency. Price stability continues to be priority for the regulator and they will do what it takes to manage the imported inflation that might slip through into our market. It is not a new policy, banks have come to terms with its reality and it is here to stay. From our perspective, I think what is clear is that we needed to trade significant liquidity buffers as well as significant capital buffers. On the foreign exchange side, we have been very discipline in how we manage our foreign exchange deposit liability. We have ensured that we are not too aggressive in our lending of funds because of the scare liquidity that you find at times like this. We have leveraged our partners the like of the IFC, the FMO, the EIB and of course the like of trading syndicate bank to raise about $400 million in the course of the last three to four months. So that is what is coming to Nigeria, providing significant liquidity in the Nigerian economy as well as to help us strengthen and buffer our balance sheet from a tenure perspective. On the naira side, we have continued to invest significantly in financial inclusion, there is still a lot of money outside the informal sector, we are leveraging our agency banking networks and also the telcos that we have significant relationship with to continue to deepen financial inclusion. Through that source, we have seen significant naira liquidity that has come through. It will interest you to know that even in the height of the crisis as a bank, we are signing on about 400,000 and 500,000 customers monthly and each comes with significant liability.
We have built liquidity buffers to manage ourselves through this period. As for the CBN policy, we understand why they have to do it, we have seen the impact that it is making and it is one that we will support fully. The short term implication for us as a bank on liquidity is something I believe most banks can manage.
You talked about having thousands of new customers monthly and earlier you talked about the new normal and how your bank is actually adapting to that. How are you positioning as a bank to fully reopen all your doors as the economy gradually reopens?
I think one of the things we have come to realise is that we will not go back to how things used to be done before. The idea of big offices, big branches, and having significant customer foothold might never come back. The investment that banks and many institutions have made in technology will have to begin to payoff. What we believe we see in the future is that branch network will still be relevant, but 70 to 80 per cent of our transactions would be done via alternative channels. So, it is about banks making the right investment and ensuring they have the right partnership to support their online and digital aspiration. So, the new normal is here and it is real and it is about banks and customer looking for a platform that is comfortable for them and allows them to be able to transact.
Some customers are more comfortable on mobile banking if the platform exist, some customer are more comfortable with online banking or USSD. So, I think there is a channel for every customer depending on the security awareness, depending on skill level and adoption of technology. And I think banks are ready, including Access Bank to provide alternative platforms for all customers to be able to transact.
Let’s talk about concern among holders of Eurobond that there could be default by Nigerian banks; do you think it is a genuine concern and what can you say to some of the Eurobond investors?
Well, I can’t speak for the entire industry, but I can definitely speak for Access Bank. As you are aware, we have been through several of this crisis and I don’t believe to the best of my recollection that there is any Nigerian bank that has failed to make Eurobond payment up on till date and Access Bank is no different as well. I am not sure that those concerns are genuine. I believe that Nigerian banks working with the regulator and of course the investors, would continue to find a way to ensure that capital investment as well as coupons, interest and yields are remitted to the home countries of investors in our market. You might find subsequently that it is no different from what we saw in 2015 and 2016 and I don’t think this will be any different.
Let’s discuss Access Bank’s recent acquisition in Kenya and in Zambia. What informed those moves?
Well, as a bank we have been repeatedly bold enough to come out every five years to share with the market what our plans for the next five years are. In the course of these five years which runs up to 2022, we have stated that we want to be one of the most respected African banks and Africa’s gateway to the world. To be able to do so means that we have to be in several relevant markets within the African continent. Zambia and Kenya just happened to be one of those markets. We already exist in Zambia, we have been there in the last 10 years and what we are doing is consolidating our franchise in Zambia. The bank’s thrust is that in every significant market that we play, we want to be in the top five bank in those markets, if we are not going to do so then there is no point being in that market. So, Zambia is to consolidate our franchise and Kenya is an entry. We have acquired a bank operated in Kenya and believe that leveraging off the entire Access Bank global network we should be able to bring significant value to the Nigerian market. As you know, the way we have divided the Access world is that we have global financial centres, which includes the likes of London, Hong Kong, New York and Tokyo. We have to be in several of those markets over the course of the next two to three years. We have what we consider as trade hubs in the likes of Dubai, Mumbai, China and Lebanon. In those hubs, we have created, several of them will operate as branches or rep office and of course we have the rest of Africa. So, we are connecting Africa to the rest of the world as well as ensuring that Africa connects within itself. In East Africa, you cannot rule out Kenya because it is central to how they do business there, and in Kenya for us to do our hub as we spread across east Africa. You know we are in Rwanda, we are also in Mozambique and we are going to use Kenya as our hub in managing that entire network that we have. There are two or three other markets in Southern Africa that looks interesting but Zambia is going to be our anchor as we invest in the rest of the southern African region. The consolidation of Access Bank in Zambia places us about seventh in that market today and I think the rest will have to be on growth and we are going to find significant opportunity to take advantage of it. We just got a license in Guinea and that operation will start in earnest, the delay has come from COVID but I think before the end of the quarter Guinea will also start operation as well as Mozambique that started about a week. We are expanding across Africa and doing that intelligently by ensuring we are not putting our capital under significant pressure and in markets that are relevant and can help us connect Africa as we see it.
What is your outlook for the economy and industry for the rest of the year?
It is all about staying afloat, you don’t do anything aggressively that will expose your institution to either liquidity or capital risk. Surviving and ensuring that 2020 is as good as last year will be a victory already. We have seen three or more sectors that are critical and we are making significant investment in those sectors, infrastructure is one. We are working with several state governments as well as the central bank, where we see opportunities for infrastructure lending we do so. For healthcare, we are working with central bank in the scheme they brought about for healthcare to lend and support the growth of the healthcare sector.
We also see opportunities in SMEs, women banking, personal banking we and of course agriculture. They are sectors that have significant opportunities and have not been affected or dampened by COVID. Telecom, food and beverages also. So, in those sectors we are growing and we will continue to invest and put our money behind it. For several sectors that are affected by COVID, we have had to realign and make payment extensions for those customers to carry them over this crisis.
We don’t see a quick recovery, we are not expecting to see a ‘V’ shape recovery post COVID, we think it is going to be a gradual ‘U’ shape recovery and it will take us to the next 12 or 15 months to fully come out of it. It is at times like this that banks have to stand with their customers, support them through the crisis and that is the only way to ensure that the partnership is sustained. So, to those sectors like hospitality and airline and the likes of construction, real estate, some commodity trading, we just have to work with them to carry them through this crisis that COVID has brought on their business. We are positive, but cautiously so and hoping that with the opening of the global market we begin to sift through into the Nigerian market. And of course you know that the World Bank is projecting that there will be GDP decline of about five per cent globally and second quarter result shows about 6.1 per cent Gross Domestic Product (GDP) decline. But with the economic recovery plan and all that the government is trying to do to spend its way through this crisis, we expect that to narrow to about two per cent down in 2020.
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