On Thursday 24th March 2022, Access Bank shares were suspended in preparation for the eventual delisting of Access Bank Plc from the Daily Official List of Nigerian Exchange Limited (the Exchange) and listing of the Holding Company, Access Holdings Plc on the Exchange.
The HoldCo to be known as Access Holding Company Plc would serve as the parent company for the group – Access Bank and its subsidiaries.
Holding companies are neither new nor rare among Nigerian banks. It dated back to 2011 when the Central Bank of Nigeria (CBN) announced that banks should give up their non-banking businesses or restructure into a holding structure. The regulator, like its peers globally, believed that it was an important risk management strategy to separate lenders from entangling with other financial services like insurance or investment company. Following the regulation, banks such as First City Monument Bank (FCMB), Stanbic IBTC Bank, First Bank, Guaranty Trust Bank (GTB) adopted the holding company structure.
Investors will have the same number of shares had in Access bank shares in the new group that will be listed, this is just a change of name to reflect the new legal status.
Investors will receive the same dividend which would have been received under Access Bank Plc.
Why the Holdco Structure?
A holding company is a company with many subsidiaries, that is, a company that exercises control over one or more additional firm(s) in more than one industry but the industries may be related.
Holdco structure unburdens the bank from oversight functions and responsibilities of managing the subsidiaries, thus focusing on its core banking operations.
Regulatory fulfilment: the HoldCo structure would ensure full compliance with the Central Bank of Nigeria’s (CBN’s) Regulation on the Scope of Banking Activities and Ancillary Matters (2010). This regulation limits the business activity of a bank to strictly commercial banking business, and thus allows such non-banking businesses to be transacted through subsidiaries owned by the HoldCo.
The HoldCo structure will facilitate the growth of the banking group and expansion of services into underpenetrated regions in Nigeria, Africa and beyond. The new structure will also enable Access Bank to diversify its business portfolios into new areas within the financial service industry that are permissible by the CBN.
The new structure would facilitate the bank’s growth and expansion across Africa, ease consolidated financial strength, expedite capital and liquidity growth.
The HoldCo structure would enhance business diversification and share price appreciation.
The new structure will ring-fence each business from the risks of the other, by preventing the business performance of one business from affecting the performance and valuation of another. Accordingly, under the new structure, the assets of the bank are ring-fenced from the non-banking businesses.
The restructured group would have greater flexibility to adapt to future business opportunities, market and regulatory changes than is currently the case.
The HoldCo structure is necessary for the effective supervision of the subsidiaries.
Credit: CBP Research