Access Bank sees strong trade finance growth through Dubai

The Access Bank UK Limited, a wholly-owned subsidiary of Access Bank Plc, a Nigerian Stock Exchange-listed company, expects to see strong growth in its trade finance business linking the Middle East region with Nigeria and other Sub-Saharan markets, Jamie Simmonds, CEO at The Access Bank UK told Gulf News in an interview.

According to Gulf News, the bank which began its Dubai operations from the Dubai International Financial Centre last year reported strong results for the last financial year with a 31 per cent year-on-year increase in global operating income to Dh95.4 million, a 71 per cent rise in pre-tax profit to Dh41.6 million and a 13.2 per cent return-on-equity, up from 8.5 per cent in 2014.

The total assets on the balance sheet increased by 32 per cent year-on-year to Dh2.9 billion with customer deposits increasing to Dh828.5 million as the bank continued to broaden and strengthen its liabilities.

Currently the bank’s balance sheet size is in excess of £1 billion (Dh4.87 billion) and share capital is £102 million following an increase of £25 million share capital from its parent company.

“Financially, we have had a very successful year with our trade finance and commercial banking businesses surpassing expectations and generating revenues of Dh66 million and Dh20.3 million, respectively,” said Jamie Simmonds, CEO of The Access Bank UK.

The bank works on a five-year plan and matches the liability side of the balance sheet with planned asset growth. In addition to the capital raised from its parent, the liability side is significantly supported by customer balances, Simmonds said.

Despite the challenges faced by the commodity cycle, and a recession in Nigeria, trading houses that are based out of Dubai and the region are taking a long term strategic view of Nigeria and other Sub-Saharan markets.

During the first year of its operations in Dubai, the bank was predominantly focused on trading houses that already had trading relations with the bank. Going forward the bank is targeting to develop relationships with regional and Asian trading houses that are doing business with sub-Saharan Africa through Dubai.

While the decline in oil prices and a devaluation of the naira (Nigeria’s currency) have resulted in a contraction in economic growth in Nigeria, Simmonds sees significant trading opportunities between Dubai and Nigeria. More than 40 per cent of Nigeria’s GDP constitutes of Agriculture and it remains a largely untapped trading opportunity.

“If you take a macro view of Nigeria, it is challenging at the moment. The naira has been devalued. The country will go into recession this year. However, if you look past that, investment decisions are not made on one or two year time frames. The country has a GDP in excess of $500 billion (Dh1.84 trillion) and economy has been rejuvenated over the past 10 years and functions mostly as a market economy and opportunities are big in areas such as infrastructure and logistics,” said Simmonds.

While there is a huge demand for infrastructure in Nigeria, Dubai’s expertise in the area is expected to create significant opportunities.

Currently about £75 million of the bank’s total balances sheet size of £1 billion comes from businesses routed through Dubai. “We believe that the size of business through Dubai can be significantly increased as the global economy improves,” he said.

Going forward the bank plans to tap opportunities to do business with Asian trading houses that are doing business with sub-Saharan Africa through Dubai. “We have a number of existing client relations in China and the whole point of establishing a business in Dubai is to further deepen these relationships and establish more,” he said.

In addition to pure trade finance, the bank also an asset management and private banking business. Last year, this business accounted for Dh5.6 million in revenue a profit of Dh1.13 million. Going forward the bank plans to tap into wealth management opportunities as it develops more business relations in Dubai. The report revealed.