In line with the Central Bank of Nigeria’s directive that banks operating in the country split up their commercial banking business from other financial service businesses, most Financial institutions in the country, have established subsidiaries that are well capitalized and managed, as well as being supervised by the Nigerian Stock Exchange (NSE).The approval of the Quotations Committee of Management at NSE, the applications for the listing of vibrant Holdings Companies was granted approval after NSE ensured they submitted all obligatory documents required for listing. This gave positive projections of the Financial institution in Nigeria, and further strengthened it.
Financial institutions, otherwise known as banking companies, are corporations that provide services as intermediaries of financial markets in any country. They are establishments that conduct financial transactions such as investments, loans and deposits. On a regular basis, Nigerians deal with financial institutions through deposits, taking out loans and exchanging currencies. Introduction of internet banks have, in fact eased the process of physical visitations to these financial institutions, as customers could execute transactions from the comfort of their homes. Examples of financial institutions include Central Bank of Nigeria- the national bank that provides financial and banking services for government and commercial banking system, retail and commercial banks, internet banks, credit unions, savings and loans associations, investment banks, investment companies, brokerage firms, insurance companies and mortgage companies.
Roy Spence, co-founder of GSD&M, a leading advertising firm in the United States, asserted that, “every business needs to be in the business of improving customers’ lives.” Thus, over the years, the financial industry in Nigeria has undergone different forms of transformation in terms of operations, service delivery and other manifestations of performance. Contributing to this changes, are increased style in the lifestyle of people, changing tastes, demanding schedules, technological savviness, amongst other modern trends, which have seen stakeholders in the sector constantly rejuvenating the wheel to meet and satisfy the needs of the ever-dynamic environment as well as the populace. As at today, the assessment of financial institutions is largely measured by their level of connection with their stakeholders and the customer-centred solutions they offer.
It can be recalled that around 2011, in line with the Central Bank of Nigeria’s directive that banks operating in the country split up their commercial banking business from other financial service businesses, the Nigerian Stock Exchange (NSE) delisted certain banks and the listing of Holding Companies in their stead. However, the presently operating financial institutions have creatively made their marks in capital holding; successfully owning other companies’ outstanding stock and gracefully doing so.
Financial Holding Companies, according to the Central Bank of Nigeria’s release FPR/DIR/CIR/GEN/01/024 dated December 30, 2011 is defined as “any corporation that owns controlling shares in another company (subsidiary) or companies (subsidiaries) to influence decision making process”.
“A financial holding company is a company whose principal object includes the business of a holding company set up for the purpose of making and managing (for its own account) equity investment in two or more companies, being its subsidiaries, engaged in the provision of financial services, one of which must be a bank”.
It continued, “A financial holding company shall be a source of financial and managerial strength to the subsidiaries. In serving as a financial and managerial strength to its subsidiaries, a financial holding company shall maintain financial flexibility and capital-raising capabilities for supporting its subsidiaries. It shall also stand ready to use available resources to augment capital funds of its subsidiaries in periods of financial stress or adversity”.
Featuring prominently on the list of financial institutions that have made their marks in the industry are UBA Group, Stanbic IBTC Holdings Plc, FBN Holdings Plc and FCMB Group Plc among others. With their Headquarters in the oceanic city of Lagos, these commercial banks have adopted a financial holding company licensed and regulated as such by the Central Bank of Nigeria for the purpose of making and managing, equity investments in companies engaged in the provision of financial services.This, explicitly permitted the commercial banks to split their commercial banking activities, whether offshore or onshore from their Financial Holding Companies, as provided by the Regulation 3 approved by CBN.
For UBA Group, which has its wide footprints across Africa and in London, Paris and New York, it has opened several opportunities for its customers through its excellent service provisions.
In its statement, United Bank for Africa Plc (UBA) announced its resolutions to reorganise its operations into a Holding Company, around June 2011. Thus, UBA was restructured into a Financial Holding Company to be known as UBA Holdings Plc comprisingof UBA Plc, UBA Capital Holdings and UBA Africa Holding.
Apparently, United Bank of Africa Plc, UBA, adopted a holding company strategy to meet the regulatory requirement of the Central Bank of Nigeria, CBN.
Under the new structure, UBA Holdings Plc established as the group parent, listed in Lagos with three operating subsidiaries: UBA Plc, which remains listed, UBA Capital, and UBA Africa.
In a statement issued by the bank in June 2011, it said: “Following recent regulatory changes in Nigeria, pan African banking group, United Bank for Africa Plc, UBA, announces the implementation of an innovative holding company structure that will drive operational efficiency, support its ambitious growth strategies and be a significant driver of shareholder value, while complying with the guidelines mandated by the Central Bank of Nigeria, CBN, for the separation of banking and non-banking financial service businesses. “The new structure streamlines the group’s operating model, permitting the UBA Group to better serve key market segments, providing superior and evermore personalised services to customers and driving value for shareholders. “The new holding company will ensure strategic, operational and brand synergies are maintained, whilst underlining renewed management focus on all customer segments. “UBA Plc, which in line with the new CBN guidelines, will hold an international bank licence, remains the flagship business of the group.” It will provide banking services to customers within Nigeria and in key international locations, including New York, London and Paris . UBA Plc will continue to leverage its large network of branches (700) and an innovative suite of e_banking products to serve its over 7.5 million customer accounts spread across Nigeria . “UBA Capital will encompass all the non_bank financial services businesses of the Group. These businesses, which have been providing synergistic benefits to the Group, include Asset Management, Stock_Broking, Insurance Broking, Trusteeship, Investment Banking and Company Registrar Services.
With this, the Group has grown in leaps and bounds sustaining its strong performance in the Financial Industry through Strong performance. It therefore has grown its contribution and market share from the Pan African Network.
The Group’s gross earnings, operating income, Operating Expenses, Profit After tax and Cost-to-Income Ratio has increased by nothing short of 20% each compared to the previous years, while its Annualized return on Average Equity has steadily maintained nothing below 16% growth in the past years.
Access Bank Plc, commonly known as Access Bank, is a Nigerian multinational commercial bank, owned by Access Bank Group, licensed by the Central Bank of Nigeria, the national banking regulator.
The Bank is not new to merger and acquisition. It could be recalled that, in 2011/2012, Access Bank took over the defunct Intercontinental Bank Plc. According to Premium Times, although the integration was alleged to be riddled with controversies as reports said over a thousand staff of Intercontinental Bank were laid off during the process, the bank emerged stronger and bigger after the acquisition.
Access Holding operates a network of commercial banks in developing countries, with a Network currently comprising ten microfinance institutions that manage an aggregate loan portfolio of over € 688M, have nearly 7,000 employees and 1.5M clients, growing by several thousand every month.
With a network that spreads across the African shore and some North American, Latin-American countries, Access Bank has been a major contributor to the success of the financial sector in Nigeria.
Stanbic IBTC Holdings, commonly referred to as Stanbic IBTC, is a financial service holding company in Nigeria with subsidiaries in banking, stock brokerage, investment advisory, pension and trustee businesses, which has successfully made its marks in the Financial industry in Nigeria. Since inception, the institution has lived up to its bidding and has continued to leverage on economies of scale to optimise costs, and to continue to provide best-in-class service to its customers.According to its Financial Statement released in year 2018, the company, which has nine subsidiaries has “carried on business as a financial holding company, to invest and hold controlling shares, in as well as manage equity in its subsidiary companies”. The company’s nine direct subsidiaries, are namely: Stanbic IBTC Bank PLC, Stanbic IBTC Pension Managers Limited, Stanbic IBTC Asset Management Limited, Stanbic IBTC Capital Limited, Stanbic IBTC Investments Limited, Stanbic IBTC Stockbrokers Limited, Stanbic IBTC Ventures Limited, Stanbic IBTC Insurance Brokers Limited and Stanbic IBTC Trustees Limited and two indirect subsidiaries, namely: Stanbic IBTC Bureau De Change Limited, Stanbic IBTC Nominees Limited. The Company prepares consolidated financial statements, which includes separate financial statements of the Company. The group’s gross earnings increased by 17.5%, while profit before tax increased by 73.9% for the period ended 30 June 2018. The board recommended the approval of an interim dividend of 100 kobo per share (31 Dec 2017: 50 kobo per share) for the period ended 30 June 2018.
FCMB Group Plc, a foremost and leading financial services/holding company in Nigeria, with nine subsidiaries, each leading in its respective segments, it has high expectation to continue to distinguish itself by delivering exceptional services to its customers, while it persistently enhances the growth and achievement of the personal and business aspirations of its customers. According to a release by the Group, in 2017, “for consistently initiating and implementing high profile capacity development programmes for its employees through quality trainings, First City Monument Bank (FCMB) has bagged the Industrial Training Fund (ITF) Merit Award as the Best Contributing Employer in Human Resource Development (HRD) for the year 2016. This is a pointer to what the organization’s goals are and they keep breaking new grounds to achieve it. This declaration underlies the Group’s philosophy; serving as a roadmap in the firms’ drive to attain the highest levels of customer advocacy as well as experience. This is while also adding significant value to stakeholders.
On another hand, FBN Holdings Plc was listed on NSE on November 26, 2012 after the delisting of First Bank of Nigeria Plc. The Bank engaged the Central Securities Clearing System Ltd (CSCS) and Market Operations at the close trading on Friday for cut-over of its issued shares through the weekend prior to the eventual listing on Monday. It also has many subsidiaries under it, which have grown in leaps and bounds within the financial year, under consideration. The Group has successfully managed its Pension subsidiary, and has increased its stake in the industry by several unimaginable percentages. This development has stimulated sustainable and diversified low-risk growth momentum as the firm is leveraging on extensive distribution network, alternate channels, digital innovation and investment research to expand its customer base rapidly.
Worthy of note is the Unity Bank Plc, with a spanning growth of over 242 branches across all states of Nigeria, giving it the 7th-largest branch network in the country, Unity Bank has confidently won the trust of investors in its Holdings after they had a turbulent year in 2017, through an impressive rise in the Institution’s shares.
As a Financial Institute, it has succeeded in Risk Management, Capital adequacy Regulatory ratios, while its Capital, Asset, Quality, Management, Earnings and Liquidity have been outstanding.
In the diaspora, the Financial Holding Companies have been in their best practices, in which the Parent is a non-operating holding company, away from the traditional regulated entity-as-parent company group structure which is being practiced.
They are entities which own or control interest in entities engaged in financial services such as banking, insurance and security. Meanwhile, their consolidated gross revenues are predominantly derived from their financial services.
Citibank, Bank of America and the likes, are leading global financial services companies who most likely practice a stand-alone policy, where the individual credit ratings , either on public or confidential basis. Each group member is subject to a full credit assessment from the FHC.
Citi has approximately 200million customer accounts and does business in more than 140 countries. Through its two operating units: Citi Corp and Citi Holdings, the Institution has provided a broad range of financial services.
CitiGroup is the supervisory body which oversees the banking, capital, financial sales and other services of Citi, with several branches across the globe. This has increased the FHC’s ability to leverage on platforms to benefit their clients. Their quest to invest in all parts of the world has seen them going as far as Korea. CitiGroup has provided financial services and has had close partnerships with the other subsidiaries of the institute that are not enlisted in the FHC of the Group.
CitiBank is the customer division of financial services multinational CitiGroup, founded as far back as 1812 as the City Bank of New York.
With over 204, 489 staff strength and located in over 4,600 retail financial centers and approximately 15, 900 automated teller machines, Bank of America has proudly provided international services to the world through its premium products, such as consumer banking, corporate banking, insurance, investment banking, mortgage loans, private banking, private equity, wealth management amongst others.
Wells Fargo, is an American multinational financial services company with its Headquarters in San Francisco, California. Putting into best practices, its services, Wells Fargo remains the world’s second-largest bank, as adjudged by market capitalization and still maintains its position as the fourth largest bank in the US by total assets. Wells Fargo is ranked 26th on the 2018 Fortune 500 rankings of the largest US corporations by total revenue. According to Wikipedia, in July 2015, Wells Fargo became the world’s largest bank by market capitalization, edging past ICBC. Surprisingly, Wells Fargo surpassed Citigroup to become the third-largest US bank by assets at the end of 2015.
Operating majorly in three different business segments when reporting results: Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement, Wells Fargo also Manages Security and Assets. As at, 2018, Wells Fargo’s Net income sums up to US$22.39 billion, while its Total assets was US$1.895 trillion
Meanwhile, Bank of America, has a total asset of US $ 2.325 Billion, and has serviced over 5 subsidiaries and division. From 1904, when it was named Bank of Italy till date, the Group has expanded its services, retaining large market shares in their respective offerings.
Financial Holding Companies benefit through their profitability shares or dividends from companies it owns; this includes shares of stocks or bonds that pay dividends/interests. They also provide services to owned companies and buy/sell assets on their behalf. Their wide range of financial services, explicitly providing them with important non-tax related benefits. The potential benefits they may derive include tax deferrals and savings, income splitting opportunities and asset protection, which far outweighs the costs of incorporating.
Obviously, FHCs have successfully controlled a major percentage of ownership in the Financial industry in Nigeria, and have shown a significant increase in profit before tax to the tune of billions. Also, FHCs have experienced a gross revenue rise in percentages, while their Net interest income has also witnessed a Year-on-Year increase.
According to an online business platform, www.proshareng.com, who gave a lengthily and factually narrated FHCs, it observed that, in responding to the global financial crisis situation, the Central Bank of Nigeria (CBN) embarked on a number of reforms in the banking sector, one of which is the transition from the universal banking model introduced in 2000 to a bank holding company business model, which makes any bank with a universal banking license essentially a “one-stop shop” for all financial services, ranging from the traditional deposit money banking to investment banking, asset management, project finance and insurance, etc.
It however observed, that perhaps the major danger in this structure is that in addition to the inherent risk in the bank’s own operations, the bank as a holding company is unduly exposed to the risks of its subsidiaries which in turn mean higher risks for the banking public.
Under the holding company structure, the holding company’s role is effectively taken away from the bank to a holding company, which must be resident in Nigeria. However, it permits foreign intermediate holding companies to be interposed in the structure subject to CBN’s approval. The financial holding Company where the holding company has both bank and non bank subsidiaries, is expected to facilitate better risk management and supervision; ring-fence the risks associated with other riskier non-banking activities in the relevant entities rather than under the bank; ensure better specialisation in the different financial services; and support clearer responsibility and reporting lines.
