Barely three months to the conclusion of the business combination between Diamond Bank Plc and Access Bank Plc, there is strong optimisms in the air ahead of May 31, 2019, deadline that the two major commercial banks set for the consummation of their merger. Although it’s no longer news that the coming together of the two banks will lead to Nigeria’s biggest, and perhaps one of Africa’s largest lender by capitalization and geographical spread.
However, there are still concerns among some stakeholders in the investing community, especially if it will not erode their investments, considering past experience in the Nigerian capital market. Hence, the questions on the lips of these stakeholders has been, what will this merger deal offer? In terms of return on investments (ROI).
No doubt, interactions with key management staff of both deposit money banks spearheading the much expected seamless transaction processes indicates that these concerns among others are already put into consideration for the benefits of all stakeholders. For instance, according to the team that are in charge of the business combination, over N150 billion could be saved as direct result of economies of large scale which will translate to returns on equity to shareholders.
Also the synergy will yield over N62billion savings on the revenue side. Adding that N40.9billion would come from extended product offering while N8.4billion from expanded digital channels. It’s expected that N6.7 billion is going to be saved from the extension of market share in corporate and retail banking markets, and another N6.2 billion to be dug from Treasury sales.
On the expenditure side, the managers believe that savings of N88.1 billion would be made; and from procurement and facility management a whopping N40.5 billion or about half of the savings is expected to come while N21 billion will accrue from cost of funds reduction through lower deposit pricing.
More savings of N12.6 billion from IT integration; N13.5 billion from branch consolidation; and another N500 million to be squeezed from support functions integration, bringing envisaged total integration savings to about N150.1 billion. The business transition managers were of the opinion that going forward the savings would improve investor’s equity returns as the merger would allow for both economies of scale and of scope as fixed costs would be shared over a much larger depositor and borrower base.
On the flip side market watchers are of the view that the merger would yield good returns to shareholders. However they cannot forecast for the banks how the returns will be. Commenting on the merger, Proshare Managing Director and Chief Executive Officer, Femi Awoyemi said integration of the two banks is one of the best deals ever in Nigeria’s financial industry, stressing that the adoption of cutting edge technology platform of Diamond Bank and the ability to deliver seamless services to generations of customers would be of competitive advantage for Access Bank which he said is being run efficiently.
Concerning the place the two integrated entities will occupy in Africa financial markets, Awoyemi said technology and efficient service delivery makes all the difference in competitive financial markets of today. “Let us just concentrate on building and integrating the bank. I have been to Access Bank in Kigali, Rwanda. Access Bank in Kigali is as efficient as anything. In fact, services they offer there is far better than what they offer in Nigeria. So being a big bank in Africa is about services, it is about customers, it is about integrating regions. That is why I am keen about what they do with technology. Generally, the bank will do well because it is being run efficiently,” Awoyemi concluded.
On the part of Marcel Okeke former Chief Economist / Group Head Research & Economic Intelligence at Zenith Bank Plc, he said it’s going to be a good deal for all stakeholders. For the shareholders of Diamond Bank, he noted, a mark-up in the share price at the Nigerian Stock Exchange (NSE) already guarantees them instant returns compared to what the value had been pre-merger talks.
Stressing that, for those of them who may choose to remain shareholders post-merger, they are going to be part of the bigger financial institution, probably the biggest in Africa in terms of customer base. He said that the role cutting edge technology and size can play in the banking market of today is tremendous, adding that going by the credibility of Access Bank, stakeholders are in for impressive returns. “So, they are going to operate as the biggest in Nigeria if not the African sub-region. This implies that they are going to become more profitable even though there are significant liabilities outstanding which I believe would be resolved,” Okeke explained.
Above all there is a general agreement, that of greater importance in the merger scheme are customers of the bank who stand the chance of achieving a lot more through the business combination. In the area of products and services, Diamond Bank’s clients will continue to enjoy it commitment to digital innovation. Which will be strengthened by Access Bank’s extra-ordinary commitment to customers, financial inclusion and sustainability, bolstered by the bank’s corporate expertise and strong balance sheet.
According to one of the merger expert “Together, we will bring the power of banking to millions across Nigeria, focused on speed, service and security. We are determined to ensure that both Access Bank and Diamond Bank customers will experience no disruption to normal banking services while we join forces to create Nigeria and Africa’s largest retail bank by customers,”
With 3100 automated teller machines (ATMs), over 600 branches, supported by Diamond Bank’s bouquet of technology-driven products offerings including Diamondxtra and XclusivePlus, over 29 million customers of Diamond and Access, more than 13 million mobile customers are going to enjoy some reward scheme for using Diamond or Access Bank POS terminal, as well as same day clearing of cheques for Diamond and Access customers in both banks.
Of greater comparative advantage to customers of both banks is the AccessAfrica initiative which guarantees service in all Access Bank subsidiaries in Nigeria, Ghana, The Gambia, Democratic Republic of Congo, Rwanda, Zambia and Sierra Leone. Which will enables the banks customers to enjoy instant borderless banking from any access bank branch. “When they walk into any Access Bank branch and initiate payment in their local currency, the beneficiary will receive an instant direct credit to their account or cash in their local currency,” said senior management staffers of Access and Diamond spearheading the merger processes.
Culled From: Financial Edge