• Says Abu Dhabi-based Etisalat Group still has a case
to answer
• Access Bank redeems $350m Eurobond
• Predicts exchange rate convergence
The Group Managing Director and Chief Executive Officer of
Access Bank Plc, Mr. Herbert Wigwe, has explained why Nigerian
banks have still not made provisions for most of the power sector
loans, despite the fact that most of the loans taken by investors
who bought up the federal government’s assets in the electricity
sector almost four years had defaulted on their loan
repayments.
He said if the banks were to make impairment charges on the
loans it would be counterproductive, as the power sector was
systemically important and critical to the growth of the Nigerian
economy.
Wigwe, who said this during an interview on ARISE News Channel,
the sister broadcast station of THISDAY Newspapers Tuesday,
described the issues surrounding the power sector privatisation as
very important and urged the federal government to look into the
issues and create some form of reprieve for investors that had
staked their funds in the sector.
“There is a problem in that value chain and there is also a
problem with the pricing of their product which everybody needs to
look at. There is a problem in terms of access to gas also. So
several little things need to be resolved.
“But this is not the first time it is happening. Remember in the
80s, the government had to step in and that was how the creation of
prudential guidelines came up.
“I think the government needs to revisit that whole (power) sector
in terms of the people who are exposed to that sector and create
some form of reprieve for them to work it out and for things to go
right.
“That is because that sector is extremely important for the
industrialisation of our country. But if you treat it otherwise,
what you get is a collapse of that sector, which would be worse for
all of us. So I think it needs to be managed and I believe the
government should do that.
“You can’t tell the banks to provide for those loans right now.
It is a very important issue and it is a national issue. It is a
national issue because it is critical for our economy.
“And the banks that were sufficiently patriotic to support
investments in power need to be given time to manage those
exposures.
“Some of the problems that have come out of these exposures were
actually not caused by the banks, but out of the fault in the
implementation of the power policy.
“Now, having said that, there is also the issue of the systemic
importance, relevance, and what you need to do about depositors’
funds,” he pointed out.
Also speaking on the banks’ exposure to 9Mobile (formerly
Etisalat), the CEO of Access Bank said the consortium of banks that
are heavily exposed to the telecoms firm are eagerly looking
forward to the timely conclusion of the network operator’s sale,
for them to defray their exposure.
Wigwe disclosed that potential investors in the troubled telco
had already started doing due diligence on the company.
In a move aimed at resolving its debt crisis and attracting new
investors, 9Mobile had reconstituted its board and executive
management to run the affairs of the company.
The reconstitution of the board was sequel to the resignation of
its former directors over the company’s inability to repay a $1.2
billion loan owed 13 Nigerian banks.
The Nigerian Communications Commission (NCC) and Central Bank of
Nigeria (CBN) had stepped in to prevent the hostile takeover of the
fourth largest mobile operator in the country by the banks and in
conjunction with the banks constituted a new board for the firm
after the withdrawal of its erstwhile parent, the United Arab
Emirates-based Etisalat Group.
Throwing more light on the issue, the Access Bank boss said the
affected banks had to take a collective impairment charge as far as
9Mobile was concerned in their 2017 half-year results.
This, he explained, arose from all the issues that were happening
in the market.
“We had to basically downgrade the asset quality and what that
meant was that there was an increased collective impairment.
“Now if you look at our exposure to Etisalat, the direct
exposure may not appear to be that significant. But we do have
exposures to other companies that do business with EMTS that are
still going concerns with different level of securities and all of
that.
“But on EMTS specifically, there was an increase in the
collective impairment and we also took additional impairments with
respect to those other exposures. So that is where we are on
it.
“It led to an increase in the impairment on a collective basis,
between last quarter and this quarter by 100 per cent,” Wigwe
said.
Wigwe, who put Access Bank’s exposure to 9Mobile at about N11
billion, said the bank made a provision of about 30 per cent on its
loan to the network operator.
“First of all, what we have done is to prepare the company for sale
and so we have a management team that is working on it. The second
is that we have appointed sale-side advisers who are now taking
bids from people who are interested and we have a live room for
people to virtually start doing due diligence so that we can
conclude the sale very quickly.
“With respect to their parent, I think as a starting point,
nobody walks into a system and takes so many loans and wakes up to
say, ‘Oh I have gone.’ It doesn’t add up. So we still have recourse
to them. That is a secondary level issue.
“But the most important thing is for us to sell the company and
see how much we can get to defray our exposure,” he said.
Wigwe expressed optimism that the Credit Reporting and Collateral
Registry Acts, which were recently signed into law by the
vice-president, Prof. Yemi Osinbajo, coupled with the Bank
Verification Numbers (BVN), would result in significant improvement
in banks’ lending to SMEs as well as retail customers.
These, he explained, would compel banks to seek for other ways
to raise earnings.
“With these, if somebody defaults on a loan, we can blacklist that
person and he cannot have access to credit in the system. The fact
that I can’t lend to somebody who has defaulted means that, that
person has been excluded from borrowing in the system.
“Now, as banks are beginning to look for other ways to make
money, look at even the EMTS exposure we are talking about, God
knows how many millions of Nigerians you would have lend to for you
to have that amount of bad loan. It is not even going to
happen.
“So people are looking for more ingenious ways to make money and
it is happening. There is increased agency banking. One thing I can
tell you for sure is certain: the proportion of loans that are
going to be lent to retails and SMEs is going to be a lot more in
2017 than it was in 2016. And in 2018, it would be a lot more.
“If you take my bank, for instance, our traditional arrangement
was we were a wholesale bank, but we are now a large diversified
bank and we have invested significantly this year as far as
expanding our channels and the retail network is concerned,” Wigwe
explained.
He also stressed the need for sustainable economic growth in
Nigeria, saying there was a need to diversify Nigeria’s revenue
base.
According to him, “I think we really need to address the
fundamentals of our economy. I think we need to pay a lot of
attention to agriculture, we need to pay a lot of attention to SMEs
and most importantly, we need to pay a lot of attention to the
power sector which drives all of these things.
“Today, the critical engine for growth is between agriculture
and largely oil prices. Now, we can achieve double-digit growth in
our gross domestic product without any change in oil prices once we
address power.
“So I think in my mind, exiting that recession as quickly as we
expected, for me is not Eureka yet, because you are still
susceptible or vulnerable to too many influences.
“However, I guess, given the current emphasis of the government
and the central bank on agriculture, if we pursue some of those
actions, what you are likely to see is that we would create a much
more robust and resilient economy, even though it will take a bit
more time.”
He opined that as more investors get into the Investors and
Exporters’ foreign exchange window and as more of them see that the
market is real, the CBN would achieve its aim of exchange rate
convergence of various segments of the market.
On his prediction for the financial services industry, he said:
“I think a couple of things would happen. You don’t just come out
of a recession and nothing happens.
“You would see a spike in non-performing loans, particularly as
loans mature. You know, some of those loans would just be maturing,
so you would see a spike and then it would get better.
“So what you are likely to see, depending on the risk management
philosophy of the bank, you would see a spike between now and
December 2018.
“But I think the banks are certainly in much better positions to
handle it than they did during the last exercise that happened in
2007-2008.
“It would cut across sectors, but more in sectors where you have
people who require imported raw materials to support production.
But I think banks are going to look at other ingenious ways of
making money and by lending a lot more in the retail space where
you have a wider margin and in a much more structured and secured
manner, pushing cards and their channels, so that they can find
replacement income for all of these.
“So I think 2017 would still remain a year of muted growth for
banks. But the stronger banks would continue to do well because
they still have strong capital adequacy ratios and strong capital
to support themselves. Overall, I think the industry would play out
better.”
Access Redeems $350m Eurobond
Meanwhile, Access Bank Tuesday announced the final redemption of
its $350 million Eurobond notes due July 25, 2017.
The securities were issued in 2012 by Access Finance B.V. – a
direct, wholly owned subsidiary of the bank – on the back of an
unconditional and irrevocable guarantee of the bank.
In October 2016, holders of $113 million of this note elected to
exchange same for a new five-year bond issued by the bank at the
time.
According to a statement from the bank, upon maturity of the
Eurobond in July 2017, the outstanding portion of $237,003,000 as
well as the final coupon value of $8,698,010 was redeemed from the
bank’s available cash reserves.
“Access Bank has continued to maintain a robust balance sheet,
supported by its strong liquidity position. The implementation of a
disciplined capital and liquidity plan ensured that the bank was
proactive and focused on raising capital in the International
market,” it stated.
Key successful Eurobond transactions by the bank in the market
included US$350 million (2012), US$400 million Subordinated Notes
and the US$300 million Senior Notes comprising US$113 Million
exchange and US$187 million new notes (2016).
The statement from the bank said the last note was issued under
extremely difficult macroeconomic conditions in 2016.
Nonetheless, the success of the transaction, the first during the
period, repositioned the Nigerian market in a positive light,
following a year of volatile market conditions, and paved the way
for other corporates to gain access to the market.
According to Wigwe, “Access Bank’s ability to redeem the $350
million Eurobond Notes highlights the resilience of our balance
sheet and the efficiency of our asset and liability management
process, especially in the face of a macro underlined by FX
illiquidity, double digit inflation and currency devaluation.
“By building a robust risk management culture and sustainable
capital and liquidity management strategy, the bank has positioned
itself to compete and win in the challenging but recovering macro
condition.
“Access Bank has continued to leverage its corporate strategy and
an experienced board and management, to consistently deliver solid
performance.
“The recent re-affirmation of its credit ratings by several credit
rating agencies as well as an upgrade to Aa- from A+ by Agusto,
reinforces the bank’s strong fundamentals.”
culled: Thsday
• Says Abu Dhabi-based Etisalat Group still has a case
to answer
• Access Bank redeems $350m Eurobond
• Predicts exchange rate convergence
The Group Managing Director and Chief Executive Officer of
Access Bank Plc, Mr. Herbert Wigwe, has explained why Nigerian
banks have still not made provisions for most of the power sector
loans, despite the fact that most of the loans taken by investors
who bought up the federal government’s assets in the electricity
sector almost four years had defaulted on their loan
repayments.
He said if the banks were to make impairment charges on the
loans it would be counterproductive, as the power sector was
systemically important and critical to the growth of the Nigerian
economy.
Wigwe, who said this during an interview on ARISE News Channel,
the sister broadcast station of THISDAY Newspapers Tuesday,
described the issues surrounding the power sector privatisation as
very important and urged the federal government to look into the
issues and create some form of reprieve for investors that had
staked their funds in the sector.
“There is a problem in that value chain and there is also a
problem with the pricing of their product which everybody needs to
look at. There is a problem in terms of access to gas also. So
several little things need to be resolved.
“But this is not the first time it is happening. Remember in the
80s, the government had to step in and that was how the creation of
prudential guidelines came up.
“I think the government needs to revisit that whole (power) sector
in terms of the people who are exposed to that sector and create
some form of reprieve for them to work it out and for things to go
right.
“That is because that sector is extremely important for the
industrialisation of our country. But if you treat it otherwise,
what you get is a collapse of that sector, which would be worse for
all of us. So I think it needs to be managed and I believe the
government should do that.
“You can’t tell the banks to provide for those loans right now.
It is a very important issue and it is a national issue. It is a
national issue because it is critical for our economy.
“And the banks that were sufficiently patriotic to support
investments in power need to be given time to manage those
exposures.
“Some of the problems that have come out of these exposures were
actually not caused by the banks, but out of the fault in the
implementation of the power policy.
“Now, having said that, there is also the issue of the systemic
importance, relevance, and what you need to do about depositors’
funds,” he pointed out.
Also speaking on the banks’ exposure to 9Mobile (formerly
Etisalat), the CEO of Access Bank said the consortium of banks that
are heavily exposed to the telecoms firm are eagerly looking
forward to the timely conclusion of the network operator’s sale,
for them to defray their exposure.
Wigwe disclosed that potential investors in the troubled telco
had already started doing due diligence on the company.
In a move aimed at resolving its debt crisis and attracting new
investors, 9Mobile had reconstituted its board and executive
management to run the affairs of the company.
The reconstitution of the board was sequel to the resignation of
its former directors over the company’s inability to repay a $1.2
billion loan owed 13 Nigerian banks.
The Nigerian Communications Commission (NCC) and Central Bank of
Nigeria (CBN) had stepped in to prevent the hostile takeover of the
fourth largest mobile operator in the country by the banks and in
conjunction with the banks constituted a new board for the firm
after the withdrawal of its erstwhile parent, the United Arab
Emirates-based Etisalat Group.
Throwing more light on the issue, the Access Bank boss said the
affected banks had to take a collective impairment charge as far as
9Mobile was concerned in their 2017 half-year results.
This, he explained, arose from all the issues that were happening
in the market.
“We had to basically downgrade the asset quality and what that
meant was that there was an increased collective impairment.
“Now if you look at our exposure to Etisalat, the direct
exposure may not appear to be that significant. But we do have
exposures to other companies that do business with EMTS that are
still going concerns with different level of securities and all of
that.
“But on EMTS specifically, there was an increase in the
collective impairment and we also took additional impairments with
respect to those other exposures. So that is where we are on
it.
“It led to an increase in the impairment on a collective basis,
between last quarter and this quarter by 100 per cent,” Wigwe
said.
Wigwe, who put Access Bank’s exposure to 9Mobile at about N11
billion, said the bank made a provision of about 30 per cent on its
loan to the network operator.
“First of all, what we have done is to prepare the company for sale
and so we have a management team that is working on it. The second
is that we have appointed sale-side advisers who are now taking
bids from people who are interested and we have a live room for
people to virtually start doing due diligence so that we can
conclude the sale very quickly.
“With respect to their parent, I think as a starting point,
nobody walks into a system and takes so many loans and wakes up to
say, ‘Oh I have gone.’ It doesn’t add up. So we still have recourse
to them. That is a secondary level issue.
“But the most important thing is for us to sell the company and
see how much we can get to defray our exposure,” he said.
Wigwe expressed optimism that the Credit Reporting and Collateral
Registry Acts, which were recently signed into law by the
vice-president, Prof. Yemi Osinbajo, coupled with the Bank
Verification Numbers (BVN), would result in significant improvement
in banks’ lending to SMEs as well as retail customers.
These, he explained, would compel banks to seek for other ways
to raise earnings.
“With these, if somebody defaults on a loan, we can blacklist that
person and he cannot have access to credit in the system. The fact
that I can’t lend to somebody who has defaulted means that, that
person has been excluded from borrowing in the system.
“Now, as banks are beginning to look for other ways to make
money, look at even the EMTS exposure we are talking about, God
knows how many millions of Nigerians you would have lend to for you
to have that amount of bad loan. It is not even going to
happen.
“So people are looking for more ingenious ways to make money and
it is happening. There is increased agency banking. One thing I can
tell you for sure is certain: the proportion of loans that are
going to be lent to retails and SMEs is going to be a lot more in
2017 than it was in 2016. And in 2018, it would be a lot more.
“If you take my bank, for instance, our traditional arrangement
was we were a wholesale bank, but we are now a large diversified
bank and we have invested significantly this year as far as
expanding our channels and the retail network is concerned,” Wigwe
explained.
He also stressed the need for sustainable economic growth in
Nigeria, saying there was a need to diversify Nigeria’s revenue
base.
According to him, “I think we really need to address the
fundamentals of our economy. I think we need to pay a lot of
attention to agriculture, we need to pay a lot of attention to SMEs
and most importantly, we need to pay a lot of attention to the
power sector which drives all of these things.
“Today, the critical engine for growth is between agriculture
and largely oil prices. Now, we can achieve double-digit growth in
our gross domestic product without any change in oil prices once we
address power.
“So I think in my mind, exiting that recession as quickly as we
expected, for me is not Eureka yet, because you are still
susceptible or vulnerable to too many influences.
“However, I guess, given the current emphasis of the government
and the central bank on agriculture, if we pursue some of those
actions, what you are likely to see is that we would create a much
more robust and resilient economy, even though it will take a bit
more time.”
He opined that as more investors get into the Investors and
Exporters’ foreign exchange window and as more of them see that the
market is real, the CBN would achieve its aim of exchange rate
convergence of various segments of the market.
On his prediction for the financial services industry, he said:
“I think a couple of things would happen. You don’t just come out
of a recession and nothing happens.
“You would see a spike in non-performing loans, particularly as
loans mature. You know, some of those loans would just be maturing,
so you would see a spike and then it would get better.
“So what you are likely to see, depending on the risk management
philosophy of the bank, you would see a spike between now and
December 2018.
“But I think the banks are certainly in much better positions to
handle it than they did during the last exercise that happened in
2007-2008.
“It would cut across sectors, but more in sectors where you have
people who require imported raw materials to support production.
But I think banks are going to look at other ingenious ways of
making money and by lending a lot more in the retail space where
you have a wider margin and in a much more structured and secured
manner, pushing cards and their channels, so that they can find
replacement income for all of these.
“So I think 2017 would still remain a year of muted growth for
banks. But the stronger banks would continue to do well because
they still have strong capital adequacy ratios and strong capital
to support themselves. Overall, I think the industry would play out
better.”
Access Redeems $350m Eurobond
Meanwhile, Access Bank Tuesday announced the final redemption of
its $350 million Eurobond notes due July 25, 2017.
The securities were issued in 2012 by Access Finance B.V. – a
direct, wholly owned subsidiary of the bank – on the back of an
unconditional and irrevocable guarantee of the bank.
In October 2016, holders of $113 million of this note elected to
exchange same for a new five-year bond issued by the bank at the
time.
According to a statement from the bank, upon maturity of the
Eurobond in July 2017, the outstanding portion of $237,003,000 as
well as the final coupon value of $8,698,010 was redeemed from the
bank’s available cash reserves.
“Access Bank has continued to maintain a robust balance sheet,
supported by its strong liquidity position. The implementation of a
disciplined capital and liquidity plan ensured that the bank was
proactive and focused on raising capital in the International
market,” it stated.
Key successful Eurobond transactions by the bank in the market
included US$350 million (2012), US$400 million Subordinated Notes
and the US$300 million Senior Notes comprising US$113 Million
exchange and US$187 million new notes (2016).
The statement from the bank said the last note was issued under
extremely difficult macroeconomic conditions in 2016.
Nonetheless, the success of the transaction, the first during the
period, repositioned the Nigerian market in a positive light,
following a year of volatile market conditions, and paved the way
for other corporates to gain access to the market.
According to Wigwe, “Access Bank’s ability to redeem the $350
million Eurobond Notes highlights the resilience of our balance
sheet and the efficiency of our asset and liability management
process, especially in the face of a macro underlined by FX
illiquidity, double digit inflation and currency devaluation.
“By building a robust risk management culture and sustainable
capital and liquidity management strategy, the bank has positioned
itself to compete and win in the challenging but recovering macro
condition.
“Access Bank has continued to leverage its corporate strategy and
an experienced board and management, to consistently deliver solid
performance.
“The recent re-affirmation of its credit ratings by several credit
rating agencies as well as an upgrade to Aa- from A+ by Agusto,
reinforces the bank’s strong fundamentals.”
culled: Thsday