Access Holdings Weighs Exit from Foreign Subsidiaries Over CBN Rules

Access Holdings Plc is considering exiting at least one of its overseas markets as Nigeria’s largest bank by assets moves to comply with the Central Bank of Nigeria’s (CBN) directive limiting lenders’ equity investments in foreign subsidiaries.

The proposed exit follows a review of the group’s international operations, which has identified an underperforming subsidiary that may be disposed of if it fails to deliver returns commensurate with its capital investment.

Chairman of Access Holdings, Aigboje Aig-Imoukhuede, disclosed this in an interview with Bloomberg on the sidelines of the African Financial Industry Summit in Luanda, Angola. According to him, the group would not hesitate to dispose of subsidiaries that fail to meet their cost of capital and strategic objectives.

“If a subsidiary cannot meet its cost of capital and the strategic objectives for which it is set up, you should be ready to take a decision to exit. Do we have one or two troublesome subsidiaries? I can think of one,” he added.

The potential divestment comes as the banking group works to comply with the CBN’s requirement that banks limit equity investments in their foreign subsidiaries to 10 per cent of total shareholders’ funds.

The directive has put pressure on Access Bank, the group’s banking subsidiary, whose investments in foreign subsidiaries stood at 19.4 per cent of shareholders’ funds in May, almost double the regulatory threshold. The apex bank had given a 12 months time line for banks to reduce the exposure to the stipulated limit.

Speaking during a conference call, Access Holdings Chief Executive Officer, Innocent Ike, said the group was pursuing three strategies to achieve compliance. These include recalling excess capital from overseas subsidiaries, divesting minority shareholdings and restructuring some of its businesses.

Ike disclosed that the group had completed a capital repatriation exercise involving six targeted subsidiaries and was engaging regulators in five countries to facilitate the return of excess capital to Nigeria.

He said the group was working to bring its foreign investment ratio within the regulatory limit ahead of the March deadline.

Aig-Imoukhuede, however, indicated that the exercise could be completed earlier than initially projected. “We gave ourselves up till January next year, and I think we’re completing this ahead of schedule,” he said.

Despite the possibility of exiting a foreign market, the chairman maintained that Access Holdings’ international portfolio remained fundamentally strong, stressing that the group would continue to assess the performance of its overseas businesses.

He said the bank would adopt a dynamic approach to managing its international investments, ensuring that subsidiaries generate sustainable returns and justify their strategic importance. “You have to do dynamic portfolio management. Every year, you’re looking” for ways to improve, he said.

Access Bank has previously withdrawn from foreign markets where its operations failed to meet financial and strategic expectations. In 2014, the lender sold its loss-making Ivory Coast subsidiary to Cameroon’s Afriland First Group SA following restrictions by the CBN on the use of parent-bank capital to support foreign subsidiaries.