Access Bank Sees Diamond Takeover Lifting Earnings by 2021

(Bloomberg) -- Access Bank Plc, which plans to create Africa’s largest retail lender by customers with the takeover of Diamond Bank Plc, expects that the deal will start adding to earnings by the third year.

“Integration comes with issues,” Access Bank Chief Executive Officer Herbert Wigwe said in an interview in Lagos on Wednesday. “We want to ensure that all our staff get working so that we don’t suffer the problems most mergers have. We want to start seeing the benefit from the second and third year.”

Access this week agreed to buy struggling Diamond in a cash and shares deal worth 72.5 billion naira ($200 million), forming the biggest Nigerian lender by assets and boosting its customer base to 29 million. The offer was more than triple Diamond’s previous close and comes after the stock tanked amid an economic slowdown in the oil-driven economy that sent bad loans soaring.

Access is looking to raise $207 million in a rights offer next year to boost its ability to lend to retail and “higher-ticket” customers as well as support its five-year growth strategy, Wigwe said on an investor conference call. “Balance sheet, branch and customer scale will allow the enlarged entity to earn greater margins and invest further in customer acquisition and the digital-banking platform,” he said.

On the relationship with U.S. private equity firm Carlyle Group, which bought almost a fifth of Diamond Bank in 2014, Wigwe said the company will speak to them. “Of course, if the stock is liquid some investors may choose to sell and some may choose to stay,” he said. “Because of their size, they may choose to stay. We have investors that have stayed with us for up to 15 years.”

Diamond will continue with the sale of its U.K. operations, the CEO said. It was part of the lender’s plans to dispose of units outside of Nigeria so it could adopt less stringent capital requirements of being a national bank. “They’ve gone a far way in the sale process so it is irreversible and there was nothing wrong with the decision they took.”

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