January 29, 2022

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How is Access Bank after M&A with Diamond Bank in 2019

How is Access Bank after M&A with Diamond Bank in 2019
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In 2019, one of the biggest bank merger and acquisitions (M&A) took place. This was between Access and Diamond Bank. The M&A lead to Access Bank owning the largest bank customer base in Nigeria. After the event, what’s the health of the bank? Who benefits from it? This article will use five perimeters from the five-year financial summary of the bank to delve into this.

I will be comparing, the bank’s report from 2016 to 2020. This will be subdivided into before the acquisition (that is, 2016 to 2018). And after 2019 and 2020.

How is Access Bank after M&A with Diamond Bank in 2019

Parameters used to Measure Access Bank

Price Earning Ratio. This is the share price to earnings per share for the current year. It is generally used to value a firm. Here, we use 7.45 Naira per share as the share price for Access Bank. The reason for this is that the bank share price has not really change since the M&A in 2019. Also, I don’t have data for share price for years before 2020.

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From the above screenshot, the bank’s P/E Ratio is higher between 2016 and 2018 than 2019 and 2020. The reason may be the use of the current share price to evaluate the ratio. However, the data shows that in terms of valuation, the company does not get better as a result of the M&A.

Dividends. Access Bank dividends paid to shareholders improved compared to the periods before the M&A. Before 2019, shares received a minimum of 15.9 billion and as high as 18.8 billion Naira. In 2019, dividends paid amounted to 17.7 billions. And 23.1 billion in 2020.

Read: Meaning General Purpose Financial Statements according to IAS 1 and Key Explanations

Based on the data on dividends, the entity pays more dividends after acquiring Diamond Bank than before. Although, it pays lower dividends in 2019 when compared to 2020. The Dividend per share for 2020 financial year was 65 Kobo per share.

Share Price. I could not lay hands on data for share price. Therefore, this basis can’t provide a reasonable measurement. According to Businesspost NG, at the time of the M&A, Access Bank shares were 7.45 Naira per share. But, the current price of the shares as at the time of writing this article was 7.3 Naira per share.

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Net Assets. The M&A with Diamond bank has a great impact on Access bank. The bank saw a growth in Net Assets of 67.49 percent after the acquisition in 2019. It Net Assets was 409 billion Naira in 2018 but boosted to 606 billion Naira after taking over Diamond Bank. This is good for the bank. Strong Net Assets base are buffer against high risk cases.

Earnings per Share. Its Earnings per share (EPS) improves after the acquisition of Diamond Bank. 2.14 Naira per share in 2017 but hits 2.84 and 2.94 Naira per share in 2019 and 2020 respectively. Although, it was all time high at 3.25 Naira per share in 2018.

Read: Meaning (Calculation) of Gross Operating Cycle and Key Explanations

Who Benefited from the M&A?

Diamond bank owners went home with 200 million dollars. Access Bank gained more market share and it’s asset base grows as well. The bank shareholders saw increase in dividends paid out. But it valuation in terms of Price Earning Ratio does not put in any good writing on the wall. However, its Earnings per share continues improved better when compared to other periods. This implies that the company earned more profits after the M&A.

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Conclusion

Access Bank acquisition of Diamond Bank in early 2019 lead to growth of the incumbent by market share, net assets and earnings. Dividends paid also increases. However, its market valuation fails to improve. Generally, it is too early to conclude on the bank’s recent takeover. More time is required to know if the M&A worth it.

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