THE NEW ACCESS BANK? NOT SO FAST!

Dear Africa Interested Professionals:  
Access Bank has completed its acquisition of Diamond Bank.  This is the second 'sick' Nigerian bank that Access Bank has acquired in the past seven years with the help and approval of the Central Bank of Nigeria.  The first one was Intercontinental Bank.  

Find below things to ponder on:

1.  The new Access Bank will in a month's time - May 2019, have to pay $209,000,000 (N75.2 Billion) as final payment to Diamond Bank's 2014 Eurobond holders.  The principal of $200,000,000 and final semi-annual interest payment of approximately $9,000,000 (N3.24 Billion).   This figure is more than the total net interest income (before impairment charges) generated by Diamond Bank for the first three quarters of 2018.  The figure is also more than the depreciated value of all the plant, property and equipment (PP&E) on that Diamond Bank had as at September 2018 of N68.2B.   Access Bank is going to bear the brunt of this repayment in a month's time regardless of how management tries to spin the story.  

2. Without adding Diamond Bank's debt situation,  Access Bank had straight debt obligations of N640B.  This figure is in excess of 3X (three times) the market value of the New Access Bank.  This is never a good thing...   Let us not forget that Access Bank just issued a N15 Billion Green Bond to further add to its debt profile.  

3.  Access Bank has listed approximately 6.6 Billion Diamond Bank shares bringing the total outstanding shares of the New Access Bank to approximately 36 Billion.  When shares are listed, the owners of the shares should have access to trade those shares.  This is not yet the case.  Access Bank is requiring Diamond Bank shareholders to fill out a form and return to its registrar before the thought of receiving the cash and shares can ever cross their minds.  Why putting shareholders through this extra step?  Just the way bonus shares are automatically deposited in the brokerage accounts of shareholders, Diamond Bank shareholders should see the equivalent ratio of Diamond Bank shares in their account latest by April 2, 2019 and available for trading.  This extra step is calculated and will allow Access Bank to avoid paying some Diamond Bank shareholders their cash and share equivalent due to non-completion of forms or other ''cooked up" irregularities in relation to the completion of the forms.  

4.  The regulators (SEC and NSE) failed investors: Diamond Bank (a sole standing corporate entity as at December 31, 2018) should have been compelled to release its audited FY 2018 result to the investing public for the sake of posterity.  Let everyone get a clearer picture of what is left of Diamond Bank that is being acquired by Access Bank.  This would also allow some of us to get a better understanding of what Access Bank left out or kept in from the merging of the books of both banks.  When we have a chance to do the unexpected in a positive sense, we never seize the opportunity as personal interests rise above public expectations built on ways and not means.  

5.  No Nigerian Bank that acquired a sick Nigerian bank has ever risen fully from the ashes of the acquired bank.  I advise you to read my blog articles written on this late last year; I separated Intercontinental Bank from Access and looked at both combined today.  Value of accretion from a profit perspective is almost non-existent!  The addition of Diamond Bank is unlikely to turn Access Bank into a Zenith Bank or GT Bank anytime soon.  Bigger is unfortunately not better in the Nigerian financial services landscape.  First Bank is still licking its wounds...   

FCMB paid N0.13 (Thirteen Kobo) dividend (from N0.36 EPS) for the fiscal year ended April 30, 2006 and paid N0.14 dividend (from N0.75 EPS) for the fiscal year ended December 31, 2018; this is six years after acquiring FIN Bank and twelve fiscal years after paying similar dividend with earnings more than doubling.  

6. Corporate Culture:  Diamond Bank and Access Bank's corporate cultures could not be more different.  When corporate cultures clash, performance and morale of employees drop.  Expect departure of many Diamond Bank customers to other banks between now and the end of 2019.  

7.  Diamond Bank shareholders that sold shares before the full trading suspension have gotten a better deal in my opinion.  Quick math for you:  

(A). 500,000 (Five Hundred Thousand) shares of Diamond Bank sold at N2.50 equals N1,250,000.00 (ignore transaction costs for ease of explanation) and NO wait time to actually deploy the funds elsewhere.

(B). 500,000 shares of Diamond Bank equals 142,857 shares of Access Bank: N500,000.00 in cash + 142,857 * 5.85 equals N1,335,713.45.  This is a difference of only N85,713.45, plus the unknown and uncertain wait time for Access Bank to actually pay the cash into your account and deposit the shares in your Central Securities Clearing System (CSCS) account with your stockbroker.  The 7% difference is clearly not worth the wait.  While prices fluctuate and Access Bank's share price can rise, given the difficulties Access Bank is having and the enormous challenges of its acquired bank, the days and months ahead will likely point towards a share price drop rather than rise.  

8. The New Access Bank's debt figure of approximately N840B (Access Bank December 2018 + Diamond Bank September 2018) is 25% greater than the cumulative gross earnings of both banks (approximately N672B) utilizing the same aforementioned periods.  Remember when news was rife of Access Bank raising equity and the bank did a quick turnaround after shareholder backlash?  Now you know why equity is needed urgently.  A bank that paid 40 kobo final dividend in 2018, could only muster a dividend payment of 25 kobo in 2019.  Access Bank could in March 2009 (at the height of the global financial crisis) pay an annual dividend of 70 kobo on net income of N21B, can now (after acquiring Intercontinental Bank that was bigger than it) only pay an annual dividend of 50 kobo on net income of N95B for FY 2018.    

9.  Access Bank wants Diamond Bank's retail customers and this is the main attraction in seeing this deal through.  We all now realize that the physical and legal structure of Diamond Bank now belongs to Access Bank.  Diamond Bank's retail customers (do not belong to Access Bank) are free to go and given the past and present anti-retail banking business practices of Access Bank, are likely on their way out.    Access Bank does not have the corporate culture & PATIENCE needed to endear itself to to the retail banking market.  


Access Bank has acquired the physical heart of Diamond Bank; the spiritual/inner heart of Diamond Bank cannot be acquired and must be nurtured appropriately to release the goodness within.  Remember, the heart of man can be wicked or good.  Access Bank needs to change its ways of doing business if it is to positively benefit (beyond size) from the acquisition of Diamond Bank.  If Access Bank decides through its actions that its ways will pervade Diamond Bank and its customers, Diamond Bank will be a perennial albatross to Access Bank instead of the springboard to a new realm of profitability so eagerly desired.     
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                                                      Tell others to tell others

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