Access Holdings Plc (ACCESSCORP) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Access Bank Plc FY 2020 Investors and Analyst Conference Call. [Operator Instructions] Please note that this conference is being recorded. I'd now like to hand the conference over to Mr. Herbert Wigwe. Please go ahead, sir.

Thank you very much, Julie, and good afternoon, ladies and gentlemen. You're all welcome to Access Bank's Full Year 2020 Earnings Call. Let me start by thanking you all for dialing to our investor call. We have earlier prepared a detailed presentation slide to share with you now. On the call with me today are Roosevelt Ogbonna, who is our Group Deputy Managing Director; Greg Jobome, who is Executive Director of Risk Management; Ade Bajomo, our Executive Director, IT and Operations; Victor Etuokwu, our Executive Director of Personal Banking; Chizoma Okoli, our Executive Director of Business Banking; Hadiza Ambursa, Executive Director, Commercial Banking North; and Mr. Seyi Kumapayi, who is our Executive Director [indiscernible] as it got many challenges, but also showcase our ability to weather this storm and stay focused on our corporate objectives. I'll briefly go over some of the key performance highlights, after which I will allow more than enough time for any questions that you may have. In terms of supporting our customers, staff and the communities we serve in 2020, like I said, it was a year like no other. And the Nigerian and global economy were significantly affected by the twin shocks of COVID-19 and the falling oil price. This led to the weakening of the naira, inflation acceleration, economic slowdown and investment decline. We also felt the impact of the twin shock in the bank in terms of asset quality, profitability, pressure on IT infrastructure, capital, liquidity as well as how we operated during the pandemic. This notwithstanding the bank continues to develop its mandates. In addition to the support granted by the government and Central Bank of Nigeria to the vulnerable members of the society and key sectors of the economy, we also put in place adequate measures to ensure that the impact of the pandemic was minimized. We are probably concerned about the safety of our customers and their businesses, ensuring that our office locations are safe for our customers and staff and that the safety of our workforce is not compromised. To minimize service disruption during the period, we increased investment in our IT infrastructure to ensure that our alternative channels were up at all times, secure for our customers to ensure that transactions were carried out in a secure manner and also supported our staff to be able to work effectively in the face of the new normal. We initiated various video campaigns to sensitize our customers on medical and nonmedical preventive measures advised by expert against COVID, to also raise the awareness of the risk of cyber threat and suggested ways to keep their accounts were all protected and also to enlighten our customers of other viable alternatives to access our services conveniently and reliably. With regarding our allocation and protecting our workforce, we established a split teams arrangement, closed collaboration stages as well to prevent gathering, periodic sanitation of workspaces, virtual meetings and made provisions for our staff to work remotely. On global network, our customer base and digital capacity as of 2020, we had 46.2 million customers who speak to our coverage on scale. We also have a strong and growing digital footprint with over 3,000 ATMs spread across geographic locations, 9.8 million digital banking users and over 49,000 point of sales equipment. Our USSD service had about 7.8 million subscribers. We have a widespread of branches in major cities and financial inclusion centers with over 300 branches and about 68,000 agents. This reflects the sheer scale of our digital footprint and as well as our physical presence. Today, we have presence in 10 African countries, the U.K., UAE and of course, 3 strategic representative offices in China, India and Lebanon. On issues relating to gender and diversity rating our recognition, like you know, gender diversity has been extremely important to us. We have almost an equal split between our male and female employees. Our risk ratings are reflective of our strong financial performance with the risk rating capped by the rating of the sovereign. We maintained that risk ratings, except for S&P, which dropped because S&P, of course, downgraded Nigeria during the year. We received several accolades in 2020. Some of these include Africa's best banks for SMEs from Euromoney, recognition for deals executed in the agri space. And of course, one of the ones that we are particularly and extremely proud of, which are our sustainability awards. We continue to win all sustainability awards provided by the Central Bank of Nigeria and that's why got 2 sustainable finance awards for the past 5 years. Picking more on our sustainability efforts and ensuring Access Bank runs in an -- in a sustainable manner, we have embraced ESG as part of our lives whether it is the diversity of our Board or our workforce or the work that we have done with respect to sustainable refinancing. We're the only climate lending bank on the continent. Financial inclusion in Africa is critical given that over 370 million on-bank adult living in the continent. We have over 58,000 inclusion agents to ensure -- or in order to ensure that there is greater financial deepening. Let me speak more to the group financial group performance highlights. Our group -- our gross earnings grew by 15% year-on-year to NGN 764.7 billion in the year compared to NGN 676.8 billion in the financial year ended 2019, comprising 64% of interest income and 36% noninterest income. Our interest income went down by 9% year-on-year to NGN 489.2 billion as a result of the yield -- low-yield environment and the key contributors include a 30% growth in interest income from cash and cash equivalents to NGN 12 billion offsetting a 3% decline in interest on loans and advances to customers to NGN 332.6 billion. The decline was driven by repricing of investment-grade loans and the CBN's reduction of interest rate on intervention loans. We also saw a 20% year-on-year decline on income and investment securities to 156 -- NGN 154.6 billion compared to NGN 193.4 billion in the prior year. And this came as a result of the sharp drop in yields on government securities during the year. And this was, in fact, in spite of a 61% year-to-date growth in the investment securities portfolio. On operating income, we gained 32% year-on-year to NGN 515.3 billion from NGN 389.3 billion in financial year ended 2019. And this came largely as a result of the significant growth in our net trading income and other operating income. And the key drivers of our other -- of our operating income were as follows: one, there was a [ 743 ]% growth in net trading income to NGN 114.3 billion from a loss in the financial year ended of 2019 of NGN 17.8 billion, and this was really on the back of net gains on derivative contracts and fixed income securities. We also saw a 27% year-on-year increase in fees and commissions to about NGN 116 billion, and this came from increased transaction velocity across channels and other electronic business that we basically have, and that was including what end up, 51%. We will continue to gain traction on these income lines as we continue to extend our retail offerings. Our retail banking business has consistently driven by strong focus on consumer lending, payment and remittances, digitization of customer journeys and customer acquisition on a large scale. We are focused on generating the sustainable revenue across all lines and all aspects of our business have continued to show significant improvement. Access Bank is truly digital. We have creative products that resolve lifestyle issues of customers, which become extremely important during the lockdown period. Over the period of 3 years, our digital banking revenue has increased on an annual basis by 58% year-on-year, with retail commissions increasing by 34% year-on-year in spite of the significant reduction in retail fees by Central Bank of Nigeria. In addition to margins, our yield on assets declined by 3.76% year-on-year due to the decline in revenue on government securities. However, this decline has been cushioned by the decrease in the cost of funds by 1.69% due to sound treasury management and the yield of our lending -- and the yield on our retail lending. With respect to our net interest margin, it declined by about 1.75% to 4.9%, and this was underscored by the drop in asset yields as our loans continue to improve. And of course, with the moderation on our cost of funds, we expect to see an improvement in the NIM. Looking at our operating efficiencies. Operating expenses was up 27% year-on-year to NGN 326.5 billion compared to NGN 257.2 billion. However, if we commoditize this, the increase is just 10%. And this is as a result of the inflationary environment, 50% increase in VAT, increase in cost of operations required by the increase by our large franchise size. The largest contributors to the growth were increased IT and e-business expenses on regulatory costs and of course, the AMCON charge, which went up significantly. However, it is important to restate that 2019 numbers only had 9 months of Diamond Bank's financials. And so if you were to now look at it in 2020 and commoditize, like I said, you'll see that increase of about 10%, which is below inflation rate. Our cost-to-income ratio has been showing improvements quarter-on-quarter. It declined by 271 basis points to 63.4% in 2020. During the year, our impairment charge increased by 212% to NGN 62.9 million because of some quality -- asset quality issues arising from the pandemic and the need to write-off challenged loans. Now Access U.K., for the first time, had to take significant provisions and its net impairment was NGN 21 billion in 2020. And this accounted for about 2 -- 34% of the group's net impairment charge. Now this charge was principally from its structured trade finance portfolio. It is a one-off COVID-related recoverable, and it's recoverable over the next 12 to 18 months as it is backed by insurance cover from world-class insurers. Accordingly, the bank's -- the group's cost of risk increased by 1% year-on-year to 1.8% in the financial year ended 2020. It was 0.8% in 2019. And so yes, there's about 1% additional, not just 1% increase so it seems, now 1.8% compared to 0.8% in the previous financial year. Speaking to synergies realized from the merger. At the bid of the exercise, we have proposed major synergies of NGN 153.9 billion over 3 years, comprising NGN 99.4 billion and NGN 54.5 billion in revenue and cost synergies, respectively. Thus far, we have achieved total synergies of NGN 133.4 billion, accounting for 87% of the total synergies proposed. And this is 2 years into the merger. In terms of the balance sheet, we have continued to grow and improve on our deposit mix with deliberate low-cost deposit mobilization. Customer deposits as at 31st December 2020 closed at NGN 5.59 trillion, which is a 31% year-to-date growth from NGN 4.26 trillion in December 2019. The growth was primarily driven by 46% year-to-date increase in our CASA deposits. So basically our current and savings account. And this reflects our enhanced digital presence, leveraging on our innovative digital platform. We have continued to grow our low-cost deposits while replacing and repricing the extensive funds in our balance in the books. Total savings account deposits closed at NGN 1.31 trillion at the end of the year, recording a growth of 66%. Subsidiary customer deposits also totaled about NGN 254.7 billion and that accounted for about 14% of total group deposits with the main contributors being Ghana and the U.K. In summary, what you would find is that this particular aspect of our business, which has showed high -- basically high cost at the beginning of 2019 in terms of the overall cost of funds, all right, apart from what we've seen in the interest rate environment, has come down significantly to sub 3%. I think it's about 2-point-something percent right now. And what that means is that going through 2021, we should see a significant pickup as far as the NIM is concerned. Net loans and advances stood at NGN 3.76 trillion as of December 2020, up 15% from NGN 3.26 trillion in December 2019. The growth witnessed as a result of our deliberate -- the growth was a witness of the result of our deliberate and increased core loan growth, but our foreign currency exposure dropped significantly to 25.9% of the total portfolio in the year due to deliberate efforts to mitigate the currency risks, which are imminent. The group's asset quality remains under check as NPL ratio stood at 4.3% in the year compared to 5.8% in the previous financial year. The key sectors responsible for these are: oil and gas services, which is about 42.1%; manufacturing, 17.9%; general commodities, about 15.9%. We consider this level sustainable and do not expect further deterioration in asset quality. Our capital adequacy ratio was 30.6% on an adjusted basis based on regulatory transition arrangements. Liquidity ratio also closed at 46%, which is well in excess of the regulatory minimum required. Our subsidiaries have also continued to grow and make significant contributions to the group. Subsidiaries contribution to group performance stood at 28% year-on-year, recording total subsidiaries profit before tax of NGN 35.7 billion. U.K. and Ghana, of course, accounted for 86% of the total profit before tax for subsidiaries with a return on average equity of 5% and 37%, respectively. Both for the significant loan loss that the U.K. took, this number would have been significantly higher as we have seen in previous years. But all subsidiaries recorded a decline in the cost-to-income ratio, but strengthen the impact of our effective cost-cutting measures across the group. Our financial inclusion and digital lending continues to grow deeper as we continue to deploy resources to reach the under-bank and the on-bank through our agency network and of course, we leveraging digital technology. Today, we have about 8.63 -- 8.38 trillion transactions, NGN 8.638 trillion worth of transactions have been recorded from our agency banking transactions through our 59,000 agents in the last financial year. As regards our digital lending, which comprises of our payday loans, small tickets personal loans, salary advances and advance financing, we have seen an increase in the scale and velocity. Our digital lending value grew by 48% to NGN 105 billion from NGN 71 billion in 2019. We also have about 4 million digital loans that were booked in the year 2020, which again represents an increase of 28% from 3.1 million loans that were booked in 2019. We also have seen that transactional values across all channels have continued to remain strong to deliver about 33.93 -- 33.9 trillion worth of transactions going through our channels as we saw in 2020, which has significantly increased from what happened in 2019. Other institutions where we're realigning for growth, and we have taken advantage of the opportunities that exist in the market to effectively serve them. And so we'll be transitioning to a holdco structure. The bank has received the approval in principle from the Central Bank of Nigeria for the restructuring of the -- and the accretion of the holdco, which will consist of 4 subsidiaries in order to tap into the market opportunities that are available in the consumer lending market, in the electronic payment industry and as well as retail insurance. On our outlook and financial targets for 2021, we remain committed to driving an efficient and sustainable business growth by intensifying efforts to increase -- or to improve our asset quality, to increase transactional banking income by migrating our customers to alternative channels and creating strong awareness for our flagship retail products. We are going to continue to drive to ensure local deposits that will then shore up and reduce our funding costs, thereby enhancing our liquidity and margins. We will enhance productivity across all our branches and staff and extract value from our existing accounts. We will reduce operating costs by aggressively executing strategic cost-saving initiatives and of course, continue to drive our major synergies to across the respective segments. In view of current reality, we have revised our initial financial year 2020 guidance as follows: our expectation for 2020 is that we will continue -- we will achieve a return of -- a return on equity above 20% cost of risk that will be less than 1.5%; our NPL ratio will be less than 4%; cost of income ratio less than 60%; net interest margin will be more than 5%; our cost of funds will be less than 2.5%; our capital adequacy ratio, greater than 20%, loan-to-deposit ratio, about 65%; and our liquidity ratio around about -- or greater than 50%. Thereby, the continued overhang from COVID and the economic downturn, we expect to see materially better results in 2021 compared to 2020. We believe that the strength of our balance sheet and our growing retail base provides us significant or substantial runway to help mitigate the risks related to COVID-19 as well as accelerate the development and generation of sustainable revenue. Thank you very much, and I will now leave the lines open for questions.

[Operator Instructions] The first question from the line comes from Tunde Ogunleye of SBG Securities.

Just a but -- a little bit of clarity on your e-banking income. So looking at the USSD volume, you're achieving 106% year-on-year. I don't have the add the sales or the sustainability of sales in the light of the end results, really. And also sticking on the total affiliated exclusive telcos, at what percentage of that debt is attributed to Access Bank? That's only first question. My second question is on your operating expenses. I want to understand, which of these expenses, because looking at your other operating expenses, I notice there was an increase in communication expenses, IT and e-business expenses, outsourcing expenses, advertisements, cash processing and stationery. So I would like to understand on the extent of looking at these expenses, which of these expenses is one-off and which is expected to reoccur in 2021? And then the next one is just to give an update on the opco structure. Could you just give a timeline as to where you expect the different subsidiaries to be officially announced? And then my third question is on your Stage 1 loan. So I notice there was an increase in your margin volume. And if you could just also give -- could you just also tell us in terms of the regulatory forbearance in transactions from -- or percentage of your loan book when restructured. And then the final question is on the tax impact. So I noticed the -- that there was an increase in your tax impact year-on-year and so it's quite significant in Q4. If you could just give like if you could shift more like as to what less with the IFRS impact because I would have expected that we will finance to use that weekly reduction in tax rate.

Okay. I couldn't hear some of your questions properly, Tunde. I will speak to those that we have. And then you would ask -- and I'll ask you to go back, if you don't mind to ask those that we did not hear. Let me speak to the OpEx. And I would also speak to the issue around the holdco. In fact, I'm going to let Seyi speak to the OpEx. All right, then I'll speak to the issue around the holdco. He would also speak to the tax implications. We're talking about the after tax implication of the CBT.

Thank you, Herbert. Let me speak to the OpEx specifically. Just like Herbert mentioned, if you look at the -- in 2019, we did the merger in March. We did the merger in March. And so what you saw in 2019 was 9 months of the combined entity and 3 months or so, really that's the -- it's not the -- in terms of comparatives. So really, if you were to commoditize overall in aggregate, cost only increased by about 10%. Now to the things we spoke about IT, and so if you look at IT and business expense, it's directly related to what you also see on the revenue side. And because of a lot of the business expense, e-channel expense also corresponds to what you are seeing. So this is the cost that we're generating the revenue on the income side and same thing for comps part of what we did as part of measure to ensure that people could walk properly on the branches was to increase the bandwidth in the number of branches, and we've seen the impact in terms of service for the bank. Now in terms of tax, I mean so if you look at 2020, you'll find out that the tax exempt went down because of the income on the treasury bills. I mean income and treasury tax and because of the yield on treasury book that has come down, that also affected the tax exempt that we have gotten in 2020. So that's really the difference between 2019 and '20 in terms of tax. So I think you should repeat the other questions I think we didn't...

Okay. I'll speak to the holdco. And then if you don't mind, Tunde, you go back and ask the previous questions so that we can address that. With respect to holdco, in terms of timing, as you know, or if you don't know, we've received approval in principal on the various subsidiaries. I think they will all become operational, hopefully, towards the end of the year. But in terms of the holdco, prop have been coming up and fully running, I think you should be able to see perhaps towards Q4 of this year, worst case, Q1 of next year. Just to add to some of the things which Seyi spoke about as far as the operating expense is concerned, one of the large items you'd have noticed there obviously would have been the AMCON charge, which is a very significant charge coming from the combined entity of what was Access and Diamond. It will not come down because, obviously, your balance sheet is not shrinking. But the idea is that we continue to optimize, all right? And we -- as we move towards reducing our cost of all of that, even on the same balance sheet side, you should start to see more revenue. But a lot of those costs are variable in nature. We do hope we can try and reduce them hopefully through various cost-cutting measures. But in the main, this is the nature of OpEx inclusive of AMCON charge that is required to run the major franchise that we have today. I'll appreciate if you're going to repeat the first question with respect to e-banking income and USSD and something that have to do with the telcos, all right? And then, of course, stage 1 loan.

Okay. So on stage 1 loans, I was asking like what was the driver of the increase in fixed volumes? And also, if you could give a breakdown as to what percentage of the intervention point, what percentage of your loan book was restructured given the intervention point? And then the second one on the e-banking income. Is that related to how you see the end user billing affecting the USSD values given that you recorded more than 16% year-on-year? Do you see that reducing over time? And then also in terms of the accumulated debt to the telcos, what percentage of this debt is attributed to Access Bank?

Okay. Thank you very much. I'm going to stick to the issue around the end user billing and the impact, if you like, on profitability and is [Audio Gap] by the banks to the telcos. And then Greg will speak to what is driving our stage 1 loans and, of course, the restructured percentage of loans in the year. Tunde, the end-user billing is not going to impact us at all. We were not charging anything other than what and -- or we do was basically sent to the telcos what they were charging. I think that it means understanding in the market, people think that we're probably making income from all of that. It's not true. We're just a pass-through. And in fact, what happened was that we're all adopting a corporate billing strategy where the [indiscernible] technically asking the banks to remit money to them, even for transactions that were not closed. And so the bank is taking the risk on funded transaction, taking the risks of field calls, et cetera. And so the desire to create an end-user billing arrangement was for the telcos to basically, all right, charge their customers directly. So we don't have to carry things that have nothing to with us. So it has absolutely no impact. Now on what you have referred to as accumulated billings, there is no such thing. And I repeat no such thing as amounts owed by banks to telcos. Very simply, when they chose to increase price, the bank says, "You know what, we don't want to do this service and help you with this service anymore. Why don't you bill your customer directly?" And they went on and said no, that they wanted to contribute a corporate billing structure even after the bank had written formally. Now it is true that they continue to provide this service, but this service has nothing to do with the banks and the banks are not obliged to pay any money. So just to clarify that there is no such thing as an obligation that were due from banks to telcos. We chose not to make a public statement out of this because it was not appropriate for us to be found fighting with telcos in the public. But clearly, there's no amount that is due from any major bank to the telcos which pertain to end-user billing. And Greg, to the issue of stage 1 loans and percentage of our facilities that were restructured.

Thank you, Herbert. So basically, I mean, as you know, we reported on a few calls back the nature of work we had to do on the back of the Diamond Bank transaction a couple of years ago. Now for Q2, see that was actually very good work because putting in the efforts to resolve the notes inherited from that bank, inadvertently, have those even better prepared for the COVID-19 that is when it came. By the time COVID came, a lot of those names have been properly structured. The ones that were -- that had the wrong structure running probably 10 loans instead of project facilities, I mean, properly set up. The ones that were rolling in dollars, many have been converted to naira. So basically on the back of those very early proactive work were the more aggressive and firm collection strategy. We were able to get them on a firm footing even before COVID came. Now with the onset of COVID, we have to review all of those again, review the scenarios again. And with the audits that we then added and took on top of that, inclusive of NIM that went to forbearance subsequently, we saw a significant migration from stage 2 to stage 1. So that migration, like I said, is on the back of the -- any proactive work that was done to ensure that the NIMs inherited from Diamond Bank continued to perform in a very solid manner. And truly, they did. So we were able to now migrate a few of them in the course of the year into Stage 1 from Stage 2. So that's part of the story. Now on the back of that significant paydowns even on the existing Access Bank facilities. Now because we were very, very apprehensive about the COVID-19 situation, the early steps that we always take and this is reflected in our historical trajectory as well. If you go back to 2017, for example, in a period of market turmoil, we anticipated reasonably well, and the EBITDA we took, including conversions from dollars into naira, as Herbert has mentioned, a significant shift from about 40% of the loan book that was in dollars have moved to about 25% of the number. So all of those levelized the book and there's no significant new actual figures that are going to be threatened. Rather, we're going to see a competitive asset quality. So those are the things that you will see. And in the absence of the issue with the U.K., you would have seen a little further reduction in the NPL ratio in 2020. Now with respect to forbearances, we were very, very strict with that. Our approach to it was If a NIM is nonperforming, it's not going to benefit from forbearance process because there's no point in bearing ahead in the fund. So all the NIMs that were performing went into forbearance. No Stage 3 NIM went in there. So that's number one. Number two, we're also very careful in making sure that the loan book that is growing and part of the book that is going into forbearance also reflected the overall performance of the bank in terms of asset quality. So we expect them to remain performing, the migration that holdco will expect to create in forbearance, therefore, there's some expectation that will evolve into NPL loss history. That is truly not the case because these were NIMs that are just going to benefit from the little leeway that they have in managing their cash flows. Therefore, they remain resilient, it would be in line with the regulators' perspective on keeping the risk sector afloat through this process. So no migration is expected. Any deterioration that will happen will be in the cost of business as usual. So I mean, you cannot say there shouldn't be any NPLs coming out of forbearance since they are part of the portfolio. But it will not go anything outside the norm in terms of where we are today, and which is below 4% NPL ratio overall. And even our historical rate at which restructured facility devolved into NPLs is, again, very low, probably about 2% or 3%. So all in all, the stage 1 NIMs improved because of the practice steps we have taken from 2019 and 2020. We do expect that trajectory to continue.

The next question comes from Adesoji Solanke Renaissance Capital.

This is Soji Solanke from RenCa. I have a few questions. The first one is just around the issue you mentioned in the U.K. business. If you can just shed some additional color around the underlying transaction and what led to the provisioning increase. And how exactly COVID affected this? And I'm also wondering because we didn't necessarily see an uptick in NPLs. So with this off-balance sheet risks, I presume that's what it was because you said it was structured trade. The second question is around the write-offs, if you could just clarify the numbers again, I think you said was well over NGN 100 billion. Can you just clarify what drove the significant write-offs and how much were you expecting for 2021? And the third question for now, I'll ask final few ones once I've got your responses is the additional provisions you've taken through equity. I think it was about NGN 25 billion, NGN 26 billion. Can you just clarify what's behind this and why the Central Bank has required you to take additional provisions on these facilities? I'll ask the additional questions after your initial response.

Okay. I'll speak to the first one, and I think Greg would address the issue of the additional provision and -- or through the additional provision that you had mentioned. With respect to Access U.K., they had a portfolio of -- as you know, it's one of the strongest banks in trade. They had a portfolio of agro-processing companies that were based in Singapore and all of that. And the way it worked was that the issued bills of exchange, which were processed across our counters. Now those bills of exchange from their customers have been honored, if you like. But what had happened is that some of those customers weren't able to repay their loans, all right, but with these things are backed by insurance where they're unable to repay their loans because, again, their working capital cycles and all that were affected largely by COVID. These are export processing companies, if you like. So what has happened is that while they have shown weakening financials, some of them have started producing good results again. And so our strategy is servicing the exposures even between the end of the financial year and date. Whilst the orders have not come out yet, and so what we've done is to put a claim against insurance because they were credit insurance that were taken fully on these facilities. So that is the specific nature of what happened. Now in terms of provisioning, I think what we took was about $65 million of provisioning on what was a book of about $114 million. Our expectation is that over the next 18 months, I think we should be able to see ourselves slowing back something like 75% of it because of how insurance works, 75% to 80%. I think we'll see a portion of it coming in this year, and the rest should come in, in the next financial year. So that's how we see it happening. I don't think we'll see any product deterioration as far as that book is concerned because it went -- we went into the book basically, together with our auditors. And as you would -- as you'll be aware, for a bank that never had anything like this, we've created a lot of issues working with the auditors to find out what could have gone wrong. So I think we've come to the bottom of it, we will basically start to flow back some of it in the course of this financial year and next year. Some of the obligors, like I said, have recovered a bit and after our positive results. And so we do not have a problem on some of them. But those that are very weak, as we've seen, what we intend to do -- or what -- not what we to intend to, what we are doing is basically calling back on insurance. But I think the fundamental thing across all the facilities, and there were about 7 of them in total is that there were no issues of criminal negligence or anything of the sort, all right? It just came from the fact that processing their products, exporting their products and the fact that supply chains were broken coming from COVID has affected all of those companies. Thank you.

Okay. Thank you, Herbert. I'll speak to the issue with respect to the write-offs and the regulatory risk reserves. So for the write-offs -- I mean, the write-offs, we've always communicated over the past couple of years. It's part of our strategy for resolving some of the names we inherited from the old Diamond Bank. We did communicate in 2019, how much we're going to take approximately to clean up the loan book. Again, we always try not to bury our heads in the sand. We will take the appropriate balance required in terms of impairment, do the write-off where we don't see a structural set of cash flows coming out and then, which is very aggressively for recovery. And that is why because of 2019, you saw significant recovery, well above NGN 30 billion, closer to NGN 40 billion. Because of 2020, the same thing, again, well about NGN 30 billion in recovery. Now all of those come on the back of those write-offs that you see. So again, it's part of the strategic steps taken to clean up the loan book. And that's why you have seen a very rapid migration in terms of stage 3 loans, the share of the loan book from about 14-odd percent at the point of merger with Diamond Bank, all the way down to 4.2% today. So it's a combination of those write-offs, plus the proactive steps that we took to having the appropriate structures for some of those loans, having the early conversions from dollars into naira. So as part of that mix of measures that the bank has taken to ensure that we get the loan book very resilient and back to where it was before the combination with Diamond Bank. So that process is spinning off gradually. Obviously, we don't significantly have been looking around that. We'll continue to recover back some of those write-offs in the course of 2021 and 2022, but will [ pile ] up gradually as we tighten that up. Now you also spoke about the regulatory risk reserves. Now that is the avenue by which regulator balances of the difference between the IFRS 9 audited numbers and the regulatory landing point because they do that separate or independent of its the book. Whenever there's a difference, as you know, we pass it through those regulatory reserves. And because of 2020, so it's not if there was a big jump in any -- or deterioration in asset quality. Rather, it was more the law. The Central Bank uses an escalation protocol. So you go to substandard, then doubtful, then loss. So for the settlement you saw in the previous year, that was at 10%. If they move that NIM to doubtful, you'll see a ratcheting up in terms of that differential between the Central Bank's provisioning and the IFRS-9-based provisioning. Of course, the IFRS-9-based provisioning takes into context the significant collateral support for those facilities. Hence, we continue to see that gap. It goes up and down. It all depends on what happens with the stage 3 loans. So that is the explanation for that. So it's actually an improvement in terms of overall NPLS, as we have shared. However, within the NPL that already exists, the additional provisioning can come because CBN has [ commits ] from substandard to doubtful to loss. Whereas on that stage 3, result is taken as one and is a collateral that protects you. I hope that clarifies that.

Can I you tell me -- just a few follow-up questions. The first one is around, can you share what your outlook is for interest rates? Because there's been -- I guess, there's some sort of broad-based pickup in interest rates going on, on the ground. What's your outlook? How do you expect this to affect your funding costs as interest rates pick up? And to what extent do you think you can reprice loans upwards in this environment? Particularly considering the significant conversions you've done from FX to NAV facilities? And the second question is around agency banking. So the transaction value you reported, I think that was NGN 8 trillion if I got that correctly. But if I'm wrong, what are the value was? But basically, can you break down your agency banking transactions into what is withdrawals, deposits, P2P transfers and bill payments? I don't need the actual numbers, just in terms of percentages. What's sort of the share of these transaction types happening out to agency banking? And finally, what's your expected quarterly OpEx run rate for this year? And do you have some sort of nominal PBT guidance for 2021?

Okay. I will speak to some of this. I will give you my own general view of interest rates and so that you can have a better appreciation of how far the franchise has come and what we expect to see in 2021. I'll let Victor Etuokwu speak to issues around agency banking. The volumes at NGN 8 trillion. Looking at the breakdown in terms of the transaction side fees, et cetera, et cetera, and how we see this building up over the next year. Our efficacy would support the objective with respect to OpEx and the fee guidance for 2021. Now let me put it this way. One of the areas we have been greatly criticized have been on our cost, most specifically our cost of funds in the past because we're seen as a wholesale bank. And before the combination with Diamond, we have managed to bring this down a bit. At the time we did the combination 3 years ago, it was still high the way you looked at us and looked at us against our comparator banks and we had cost of funds around about 3%. Our own cost of funds at that time was about 5.9%, et cetera. Now what we've seen is that the interest rate environment and we started to be able to double up on the growth of our savings accounts and current accounts has led to the cost of funds dropping from 5.9% at the beginning of 2020 to what is about 2.9% -- actually less than that, 2 -- about 2.7% at the end of 2019. Now on an actual basis, it is -- or rather, on an average basis, you would have seen the full effect because it's 6x around down the overall cost portfolio, all right, to get to that figure at the end of the financial year. On an actual basis, it is less than that. Let me put it this way. So it's probably about 1.9%, et cetera. So what has that done? It has brought us very close to our proprietary bank. Then probably we'll have much room for much more improvement, if you like. So what this has done is to, if you like to have our Q3 report [indiscernible] part of our [indiscernible] so 300% difference in price. [indiscernible] Now with interest rates picking up, we are becoming to hold our cost of funds. Obviously, you will see a bit of change, but our view is that in the main, we will see cost of deposits at about something like -- at less than 2.5%, all right. But overall cost of funding should be about 2.5% because the Central Bank debit, you're having 60% money in [indiscernible] but at least with that, we should find ourselves well below 3% through 2021 as far as cost of funds is concerned. Now as we're repricing the loan the [ RICS ], we have to because of the increased price that we've seen on the deposit side. I think what is most important and what we are alluding to is what type of NIM are we likely to see. Our expectation is that we should start moving gradually towards a 7% NIM ratio, if you like, from what is about 4.9% right now. At about 7%, 7.5%, we should be reasonably comfortable, particularly given the risk profile of the clients that we have. So that is my view with respect to interest rates and the implication of our business. We will see significant benefits given what we've seen, even though interest rates are going to go up. But in Access Bank kits, specifically, we're going to see an expanded NIM, all right, because of how far we've given our cost of funds down by the way you look at those compared to other -- of our competitor bank. Now in terms of OpEx, I think we will hold. At this price, we will now start to fine-tune and bring down our OpEx. As Seyi mentioned, what you see on a commoditized basis is basically matched against inflation at about 10%. I think that we will try to hold the figure the way it is. If we can, we'll bring it down, but I don't think you will see any uptick, even though inflation is going to try to push -- is going to try to push that figure. I think it is still far to assume that we hold on that figure rather than grow on it. If we can shrink it, we'll shrink that figure. On our fee guidance, and of course, Seyi will speak to these 2 points as well to support me. I think, quite frankly, you've seen a big expansion as far as retail earnings are concerned and digital banking revenue. You also have seen significant customer acquisition and increased customer velocity from what we're doing. My expectation is that, again, if you begin to imagine that all of these things started perhaps in the second half of last year, given that the 2019 really was 9 -- was 3 months -- 9 months of Diamond, the impact of integration and all. I believe that in 2021, you will see, in my mind, a 25% increase, at the minimum, as far as commission on fees are a concerned. And I think you will see it in the first quarter. You will see it in the half year. Those figures are constant soon because we are seeing increased customer activity. And in spite of the fact that we've done more measures than any institution in the country and the continent that we've seen our systems now settling down and we're seeing phenomenal throughput in terms of customer transactions, velocity, NIM -- NIP volumes, et cetera, et cetera, which is a reflection of the fact that we're getting customer activity to where it ought to be, all right, after integration. So that is the kind of things that I see, but I'll let Seyi say 1 or 2 more things about that, and we'll take it from there.

Thank you, Herbert. I mean, just like you said, we are expecting about a 25% year-on-year increase in commission fees. This is outside of the operating income. So this should take us to something like about NGN 36 billion on the quarterly business in terms of what we are looking at. I mean if you look at 2019 to 2020, we grew commission fees by 27%. So what we are seeing is not outside of what we've done before. So this is doable. And I think we started to see that impact even within the fourth quarter of the year.

So I'd like to...

[indiscernible]

Okay. All right.

Thank you, Soji. You asked questions on the NGN 8.3 trillion worth of transactions around our financial inclusion segment. Now this costs across, as you know, we have about 20 million mass market of financial inclusion customers in the bank. And when you guys are transacting, we do so in millions. Last year, we had about 350 million transactions from these group of customers across the year and about NGN 8 trillion, giving us an average of about 23,000 net average financial accounts size. And this is across our agency banking. We have about 50,000 agents last year. This year, we are going to close the year with 120,000 agents. So -- and we are doing another of 300,000 transactions a day for those agents. That was last year. This year, we are doing about 500,000. So even -- so we are expecting that we'll see north of NGN 10 trillion in this segment, in transactions in this year. And we are hoping to open about 3 million accounts from these segments. So this is across agency banking, better activities in the marketplace. In terms of transactions types, these transactions types, [indiscernible] might be around cash deposits, cash withdrawals and transfers. And in terms of proportion, I will say transfers would be about half of that and cash deposit 40% and 10% for -- cash withdrawals 40% and 10% of cash deposits. So that's the structure and that's what we expect to do in 2021.

Soji, does that complete your questions?

Yes, that's very helpful. So transfers this half withdrawals, 40%, deposits, 10%. Yes, that's helpful.

The next question comes from Ronak Gadhia of EFG Hermes.

3 or 4 questions. Firstly, on your payday loans, could you just give a bit more information specifically on what kind of NIMs you earn on that product and what the underlying risk charges? That's the first one. The second question is on your capital. So if I look at your capital, I think the calculations, I'm a bit surprised. Because if I look at the credit risk, it seems to have declined by about 8% whereas when I look at your net loans, it went up by around 10%. So could you maybe just share some thoughts on why we were seeing opposing trends on those 2 items? My third question is on your trading income. If you could just give some guidance on what you expect from trading income this year. And the final one is on your net open position. Could you just tell us what the net open position is specifically for Access Bank Nigeria?

All right. So I'd like Victor, again, to speak with respect to our payday loan and the underlying risk charges associated and the risk mitigation arrangements, which we actually have. And Greg can also speak to that so that we can derive some comfort. Greg will speak to the issues of capital adequacy. And of course, Seyi would address the trading income and the NIP position.

Okay. All right. Now on that -- the payday loan, the timing, there are 4 types of loans we cover. One will be payday loans. These are accessible to Nigerians, especially for employees. Ticket size averaging NGN 25,000 to NGN 30,000. We have the small ticket loans. These are also for employees, average tickets, NGN 50,000. We have device financing, this is essentially to buy phones in our collaboration with telcos. Our salary advance is likely -- it's just a monetary facility, likely again for employees, average ticket size is NGN 200,000. So these are the 4 types of digital loans that we have. Essentially, these loans are largely for employees who will come to the bank and we manage their accounts. And therefore, we have a process where there is an auto collection mechanism where you pay down just upon getting the scenarios every month. Now we have another group of customers who are not employees, but who get small businesses would get a regular stream of inflows throughout the month. Those also come in. And in terms of how we determine eligibility, first of all, it has to be regular inflows; two, it is a percentage of the clean NIM over a 12-month or to 24-months period. And this is done -- and collection is done automatically. Now we also set aside 1% of the 2% or 3% fees at a loss and doubtful account we pull aside for any kind of delinquencies that we'll call. We closed last year on this portfolio at about 4.5% NPLs. And that was far below the amount that was set aside in doubtful accounts to provide. So clearly, it's a portfolio that is doing well. And what we'll keep, improving the algorithms and efficiency of collection. And that's what we keep in our plan is that it will remain below 5% NPL portfolio. Thanks.

All right. I do hope Victor answered your questions properly. But I think he tried to summarize it, but these are very -- there are very stringent algorithms that have been derived to pull out, again, what types of risk charges, what interest rates would just -- would consolidate over 4% flat on a monthly basis. I think in terms of the charges that are going on an annual basis today, I think first of all, the NPL ratio as well, is about 6% or 7% as far as that 4.5% as far as that -- as actually the loan book is concerned. But let me just speak a bit to the trading income and net open position. First of all, our net open position limit, which is about 10% of our shareholders' funds, is about $210 million today. Our trading income that we expect in 2021, not very different from what we saw last year, and you can go back in time and see what it is by the time you look at the amount of the treasury bills and of course, what you also see with respect to the cost on the derivative side, you will see anywhere between NGN 86 billion, in my view, and NGN 100 billion in 2021, not more than that. But I'd like Greg to speak on -- Ronak, if you can repeat the question on capital adequacy. I think you are speaking to the reduction in the risk-weighted assets or something like that. So Greg is going to speak to it. And if it's not the exact question, please, I'll appreciate if you go ahead, please.

Okay. Thank you, Herbert. So I think you'll find a couple of things that the bank has already driven in terms of how we approach our capital management. I will focus very strongly on efficiency. It's important we've seen about a past 3, 4 years. So we try to get our loans as supported and mitigated as possible by deposits. And as we've shared earlier on, we've seen a significant growth in the funding base of the bank. Now that fund will be a good chunk of it is structured to also support loans that are within the bank. Now that provides significant credit risk mitigation. And on that, the rules that we applied in Nigeria, those litigations are direct deductions before you compute your risk-weighted assets. So that's number one. It's the fundamental point. The second one is around what is called credit risk here includes a whole raft of things. Some are even sovereign-type instruments are they represent risk. So you might see a growth in total assets, but you will not see a growth in credit looking at if -- in risk-weighted assets if a significant part of that is going to investment securities, for example, which we did have in 2020. Now those are zero-weighted. So all in the combination of zero-weighted investment securities, and significant credit risk mitigants, like I shared earlier on, that combination is what I've meant for that slower growth in risk-weighted assets overall. I don't know if that addresses your question. If it doesn't, you can come back on the line.

That helps. Just maybe 1 or 2 follow-ups. Firstly, on the net open position. Herbert, you indicated that it's 10% of shareholder equity. I was just wondering how you calculate that? Because if I look at your U.S. dollar balance sheet on the financials, it seems the net of composition could be as high as about NGN 1.3 trillion, when I take away your assets from your liability. So maybe if you could just help me give a better understanding on that. And then just a final one, on your special bill, the special bill that you received from the CBN, I guess, in December. Could you just highlight how this bill have been classified? Are they mark-to-market, fair value through P&L or held to maturity? And if they are held at fair value, are you expecting to record losses on that given the yields have increased?

Okay. [indiscernible]

Hi, apologies, this is the operator. Unfortunately, we seem to have lost your sound. If you can perhaps move closer to your microphone?

Okay. I think if I understand, you are trying to ask questions with respect to our overall balance sheet aggregate, okay? And you are raising that we have a net composition of about 1.6 -- or NGN 1.3 trillion, which is not obviously not correct because I think you need to look at the aggregate balance sheet, all right, to understand what it is. And then issues around the fair value and what is taken to the -- into P&L, I think. Seyi is going to speak to it, then we'll take it from there.

Thank you, Herbert. So let me speak to the special charges. I think we have about NGN 36 billion, and it's a fair value to OCI. That's how we've done the [ achievement ]. With respect to the net open position, so if you -- we say yes, if you look at the own balance sheet, you will see that if you look at the aggregate both on- and off-balance sheet, and what you'll see is actually $110 million. So you might be right to look at it, but if you look at the optimal, you have to take both the on- and off-balance sheet because what is causing that gap on the on-balance sheet is the sales. And in the -- on the contingent side, you also see it on the contingency side of this balance. And therefore, you have to look at it in totality to really see what the real position, which is around $110 million outside, $110 million.

So it's $110 million short, right?

Short, short, short position.

Okay. Understood.

The next question comes from Kato Mukuru of EFG Hermes.

I'd like to go to Page 15 where you talk about your operating costs. I was reading the transcripts of the Diamond Bank acquisition when we had our last call. And I specifically remember and I saw in the transcripts and you talked about NGN 30 billion a year in cost synergies. So could you just tell us where the NGN 30 billion were in the past year? Because I don't see the very strong cost savings in those numbers. Then I had a question. I noticed that your -- the costs related to cash processing in FY '20, went up from NGN 3.7 billion to NGN 9.9 billion and it's amazing increase. How is that possible given the extent of the increase in your digitization? I mean I was so impressed to see your transaction values increasing 82% year-on-year. That was amazing. And then why is stationery and postage and stuff like that going up from NGN 1.9 billion to NGN 5.9 billion in a year like last year? And lastly, I would say I'm really focused on the cost because that's where I thought the benefit with the merger was. That's why I'm asking all these cost questions. On business travel, business travel was only down 30% year-on-year in 2020 to NGN 7 billion. How can business in a year like 2020?

Okay. I'll start to answer some of the questions. And with respect to OpEx. And then Seyi will get into the more detailed numbers, whether it is with respect to travel costs and all of that. Now the cost savings you probably saw at the time we did the merger, in terms of net synergies, we spoke to a couple of issues. It had to deal with: one, overall cost of funds; two, overall cost of operations. And of course, at that time, we broke it down into things like head office costs, operating costs, i.e., rushing stuff, either bringing stuff to the right members, et cetera, et cetera, that needed to be done and all of that. Now it is that total that brought about what we saw as cost synergies of about NGN 30 billion, if I recall. If you take the cost of funds, for instance, all right? Yes, a little over 3 years. Yes.

Yes. It was NGN 30 billion per year. I'm reading the transcript right now. Sorry to interrupt you, Herbert. It was NGN 30 billion per year.

Still not a problem. Now if we take all of those cost items and we take the cost of funds for instance, the reduction that we've seen, all right, we are reducing our cost of funds at the time of the merger, which was about 7% or 8% all right? And today, that cost of fund has come down on a nominal basis, average -- weighted average last year to about 3% cost of funds on an actual basis actually was 2.4%. Now even if you took only that figure and you asked what did it come to, all right? I'm sure that it makes a mess of this whole -- of all of these numbers. Now you can say that, oh, the general interest rate environment crushed. Now but by how far, all right, it has gone down, all right? And what was the mix? What was the growth in savings accounts, which was one of the strengths we saw in Diamond and some of the products which we pushed? I think today, we are the second as far as our savings volume is concerned. At the time of the merger, our combined service account volumes was about NGN 600 billion. Today, that figure is NGN 1.3 trillion. And there's only one bank that compares to us as far as the savings account is concerned, and I say that is First Bank. Now if you do the same thing and you ask for current accounts, the same thing, all right? Now this is coming as a result of exploiting the benefits of the customers coming -- retail accounts coming from the merger. I would not finish that process yet, like I said. It is -- the system is only just settling down. And if I'll go to give you in final details, all you need to do is to look at our NIP volumes, all right? And that is basically a reflection of the retail number of retail transactions we are doing. Today, I think we have about 20% -- 19% or 20% of that market. When we started, I think Access Bank probably had maybe about 11 -- sorry, 8%. Diamond Bank had about 6% or 7%. So that combined figure is now showing the real value. So those are the synergies we spoke about. So in terms of cost, of course, you'll see. Now the other cost, for instance, head office cost, we said we're rationalizing. That has now been done. But the full impact of that have not going to become [ manifest ] because we -- those head office buildings that we do not require have been sold only just -- actually, it happened in -- towards the end of the financial year 2020. Now we could go on. Now obviously, some of the costs could not have been obtained because as COVID came in, all right, the system did not allow us to do the rationalization. And I'm sure you saw it quite a bit of the opera that came up at the time at which we're basically trying to rationalize staff, all right. And the system said, nobody was allowed to do anything at a particular point in time. Now if we move on to -- and the savings on CBN cash deposits and all of that, those are some of the things we spoke about. We're going to see savings of NGN 10.505 billion. But let me tell you what has happened, which is actually the contrary and better for us. Where you see cash processing growing from NGN 3.7 billion to NGN 9.9 billion, what it has shown is the significant volume of transactions being putted to the bank, okay? Again, if you see what would have happened in terms of the buildup of money that we have with Central Bank coming from the foreign exchange customers who are depositing $10,000 or whatever it is. Now the cost of processing, all of that has grown, but it's also manifested in the balance sheet. Now the question would be, how efficient are we going to basically push that balance sheet for the benefits to come out? And I think that is still some of the things they're going to see in this year. So in terms of the cost savings, Ronak, I want to confirm to you that we are right on track as far as those cost savings are concerned. And if there's any discussion that I've got come from the reduction as far as interest rate environment is concerned. I think the volumes that you see with respect to the current accounts and the savings accounts purely as a result of the new efforts, all right, that the merger has pulled would deal with these corporate -- these cost savings. But I'd like say to speak to the other aspects of cost issues that have to do with travel costs and all of that. So today, we've got about NGN 33 billion out of the NGN 36 billion that we're expected to see on an basis. Seyi, go ahead.

Thank you, Herbert. I think I will just pick up from where you stopped. And like I said earlier, those comparatives are not exactly correct because of the timing difference of 3 months. I think that -- so the numbers I have seen, seeing NGN 1.9 billion is not exactly what -- which we did, the numbers are not doubled. I will also -- I will -- now you did we do the NGN 30 billion in savings and costs? Yes, we've done it. And if you look at those are the ways that we look at the issue around [ SB ] on branch operations, we've done it now. I think I will take it on. Now cash processing, clearly, what has happened is that our transactional volume, all right, has more than doubled, all right, over the last 2 years in over the -- of -- and even '20 with COVID. We've seen that a normal transaction that we do. Now we mentioned to do that one in every 2 transactional and or stock in Access Bank in terms of capital. So we've seen significant -- and we are seeing it on the balance sheet. So maybe this is the cost of the balance sheet that we are carrying. So this is real in terms of what we are seeing in terms of cash processing charges. And for dollar cash, the cost of what you pay today is significant for what we -- is going on for all these that I think is about 1.5% that you get charged for every dollar, and that you go up opposed with the Central Bank of Nigeria. So the real cost associated with the business that we are doing. Stationery. Stationery has increase also because of the volume of the business that we are doing. Now for all things that we are had to -- we are to replace some checks from customers for free and because we have to then change a stationery chain pad, and just the cost of -- because we kept in doing, so even after the merger, there were things that were left and we pushed into business as usual. We stopped counting them as major expenses. So all of that is still ongoing. Now business travel, as you've seen. I think at the last call was we then said that this business cost were going to come down. And it actually come down. What we are going to see about in next -- in 2020, that number that we referred to, it's a gradual reduction, and we believe that by end of 2021, what you see will be half of the number that you are seeing and we continue -- gradually continue to reduce that to a level that at least we are comfortable with.

Would it be possible going forward to have a slide that shows what you've done in terms of cost synergies versus your targets? Just so we can have a way of saying, Access has done a really good job on this consolidation, and this is why. Last question on the whole consolidation is, if you look at your return dynamics like return on investment or accretion dilution, how is it going versus what you expected from the acquisition? To what extent are you ahead or below targets in terms of -- if you thought the deal was accretive in year 1? How much more accretive has it been? And I guess, another way of looking at it, do you think you paid -- are you happy with what you paid for Diamond? Do you still think you've got a very good deal?

Well, I'll speak to that. I'll speak to it theoretically. And then if you need numbers to support it, we'll pull out the numbers. Now just a couple of things. We had -- in the course of the merger, we had shared with the market some of the things that we're going to do. And if you recall, we have said we're going to close 100 branches. Obviously, we've not been able to shut those branches. Well, we shut them because of COVID, all right, but all that was shut in real terms was 50, okay, just because of the difficulty in shutting branches. Now have we been able to make sure that those branches become profitable? They're broken even right now, okay? And so we'll start to see the benefits that will come from it. Two, Diamond Bank with its own issues around bad loans and, of course, currency exposure. We are very quick to combat all of those into local currency, so start -- to start to take the provisioning on it as you've seen, and of course, to do the recoveries. If you see the recovery figures, you will find out that quite a bit has been done, all right? And I think we basically recovered more than 50% of the figure that we said we're going to do. I think the real benefit was in the creation of a strong retail powerhouse. And I think without doubt, that is becoming manifested in that. And you'll see it in our current account numbers, you will see it in our savings account numbers. You will see it in the new and emerging cost of funds. You will see it in the retail commissions and fees coming from share transactional processing. You will see it in the NIP volume, all right, all of those things we think that we wanted at the time that deal was done. So for some of people who may have thought that it was a bit expensive, I think quite frankly, we're happy with what we've seen. The results of 2021 are going into the future, we showed that a central merged entity would reflect exactly what we are trying to do. So today, if you like, in the main, if you look to what Seyi said, you will find out that we are running -- we are far beyond the figures we have said as far as major synergies are concerned. As in terms of my accretive value, we are far ahead. But I think those are not the numbers we are looking at, at this particular point in time. We are in a competitive market, all right? And we have the strategic push to which we are trying to pursue. And I think what is important for us is well beyond the accretive values of Diamond for us to be able to see ourselves as the leading bank in the country.

A clarification from this side.

Go ahead.

Okay. Just to let you know. Well, we -- the merger synergies that we said we'll do about 3 years was NGN 150 billion. At the end of year 2, we have done NGN 130 billion already. So we are well ahead of our run rate of those synergies. Secondly, before...

Sorry, sorry. Sorry to interrupt. Did you say NGN 130 billion you have done, sir? NGN 130 billion, you have done?

Yes, we are at NGN 130 billion at the end of year 2.

This is year 2. There are 3 years.

3 years. Just to give you a bit -- some -- okay, just remember, before the merger, we had about 12% or 3% of market share in savings or in deposits. Today, we are 25% of market share, okay? Before the merger, we have about 18% of customer accounts in the industry. We told you we are over 1/3 of the customer accounts in this country. We have 69 million bank accounts in the country. Today, we have about 40 million of that. So in terms of accounts that are registered would be the -- and everything, we have well over half of the accounts in the country. In terms of market share in a loan, we are -- we're also 1/4 of the market share. So if you look at the size of the balance sheet, of course, you know that we have the bigger balance sheet in the country. Now all that this has been about is that as you move and digest this acquisition and measure into third and fourth year and fifth year, you begin to see a lot more efficiencies. And then the profitability will not come to match the size of this business. That's what you'll see. And but clearly, every single expectation from the merger, most of which are well on track.

Thank you, Victor. So the point is what price you pay for profitability for the size that we have for the commission fees, which are becoming evident in the market as growth in anybody else, for the customer base that we have, active customer base, for the revolved balance sheet, for the emerging cost of funds, which was a great criticism that we had. Those are things that we believe that coming out of the major and the benefits and the learnings we've had, we think that we've truly got a good deal. And even for the Diamond Bank shareholders, we think it was a fair deal to everybody. Thank you very much.

[Operator Instructions]

Well, thank you very much, ladies and gentlemen, for what is a very interactive session. We thank you for dialing in, and we look forward to the next couple of weeks at the half year -- do we have any more questions?

Apologies, sir. Yes. Unfortunately, we do, sir. We have questions from the webcast.

Awesome. Go ahead.

So there's no further questions from the lines. We'll hand over to the webcast for questions. Thank you.

Okay, right.

So we have questions from Wale Okunrinboye of Sigma Pensions. First is, given the reversal of interest rates observed thus far, what is the impact on your trading income, positive or negative? What would you say you've done to help mitigate any downside? Second, how much of CBN special bills did you receive from the CBN in naira terms? How are you classifying these instruments' fair value or amortized costs? Thirdly, how quickly do you expect a repricing in loans to capture the interest rate environment? Then what is your view on FX liquidity and the exchange rate in 2021? There are further questions. Would you like to answer those? Or shall I continue?

Okay. I will start to speak to some of them. Those that we didn't hear properly, we'll ask Wale to ask again. I think, first of all, in terms of repricing of loans, we have started repricing these facilities. Obviously, there is a lag. I think that, that lag, in my mind, will be anywhere between 60 and 90 days for us to reprice the -- as far as the rate of -- actually on loans, and I think we started doing it, and we'll see the benefits. But I think what is more important in our own case was how quickly and where we kept the cost of fund. So I think you will see a NIM expansion, all right? And that NIM expansion will take us to around about 7.5% in 2021. With respect to FX liquidity, I think we are seeing a growing FX liquidity from the Central Bank. Obviously, there are a couple of things that need to be done. The IMT window needs to be a bit more active. CBL has been meeting its own end of the bargain. And I think what we need to do now is to push more investments FDIs and FPIs to come into the system. But they have also shown a significant increase given where it was last year. And I think for most banks, that figure has doubled. If you ask me from less than what would have been about $400 million or $300 million a month, that figure is getting close to $1 billion in a month, quite close, not just yet. So we've seen a significant growth. And I think that by the end of the first, second quarter, perhaps we can see as much as $2 billion in a month. So that is how I see FX loans getting better. But I think it calls for more planning and better planning. And all that the Central Bank is trying to do is for people to basically ensure that customer demands are met in a logical and sequential manner, all right? If everybody comes to the market at the same time irrespective of where you are in the world, you will see a problem. So we think that there's enhanced FX flows and it should get better as the IMT volumes come in a bit more. I'd like someone to speak to issues around reversal of interest rates in terms of interest rate direction and what it means to our trading income in 2021.

Thank you, Herbert. So as we had expected, is new interest rates were going to go up in 2021, following from the -- from all the macros and the indices we had seen. So this will not have an impact on our trading income because we have foreseen this, and we have taken the necessary positions. As of December when we saw that yields had gone very low, we also decided at that point to take some strategic positions, which have paid off now as we've seen interest rates on treasury bills and fixed income securities going up. And from indications, they will still trade much higher, especially as the federal government still has a lot of volume to do. So to answer, in a nutshell, we are well positioned for this, and we expect that revenue income to increase. Thank you.

Okay. I don't know if there are any more questions.

Yes, sir, there are some more questions. The question is, what products would you say dominate in terms of digital lending: payday, device acquisition and et cetera? In view of recent transactions in this space, what are the -- are there plans to spin off your payments business to allow shareholders capture the deep value inherent in this entity? Then how do you define Board independence -- I'm sorry, sir.

Victor Etuokwu -- I'll let Victor Etuokwu speak to which of the loans in our lending business dominates. And do we intend to spin it off the outsides here. There's so much more value to be created from it. I would think that by being independent on the creation of malls and the given algorithms and pushing the mass products a bit more outside the market, outside the bank, apart from the bank as a platform, there's still so much value to be created -- to be created from it and value to the overall enterprise. But I'd like Victor to speak to which of the products dominates in that portfolio.

So like I said earlier, there are 4 products. But for now, there are 2 them that are front on us, the payday loan and salary advance. The payday loan is structure in the facility, as I said earlier, for employees. And salary advance is the short-term, 6 months to 12 months duration. They are both -- at first, the payday loan was almost 50% of the portfolio, but now it's down to 40% because these are advances now -- will not have a few longer internal loans coming into 6 months. So right now, that's what it is. But for employees, it's still payday loan. Thank you.

Thank you, sir. There are 2 more questions. How do you define Board independence in terms of shareholding? As I can see, there was a recent notification on the NSE that showed that the Access Chair who is an INED holds around 0.02% which may or may not fall within the threshold. I'm not sure. And then lastly, what drove the loss at your Kenyan subsidiary? And can you provide outlook on this segment going forward?

Okay. I think, first of all, I'm not aware of this notification. But I think 0.02% and I don't know how many units, that is, was certainly not up 2.5%, a lot more up to 0.1% of what the bank had is still within our acceptable threshold. But I'm not even aware of this specific notification. But I'll check it out, and I'll get back to you because up until now, shares remained independent, so I'll just find out what it is. But I think it's well within the threshold. I think the next question had to do with Kenya. And of course, as you know, the Kenyan subsidiary only just started. And what we've done is, I guess, maybe some of the provisions coming from the prior transnational banks have been taken. And maybe that is what you've seen into it. But just to let you also know that all of those things we had factored in at the time the negotiation was being done with transaction pricing. And so in terms of shareholder cost to us, I don't think that you would see anything significant. But that's what has happened there.

Thank you, sir. No more further questions.

Awesome. Thank you. Any more questions, please?

And confirmed, sir, there are no further questions from the lines and neither from the webcast. Thank you.

All right. So I think that brings us to the end of the investor call for our full year 2020 financials. We look forward to seeing you in a couple of weeks or the -- at the end of the half year for a better call at that particular point in time. Well, thank you very much for what was a very active session. Thank you.

Thank you very much, gentlemen. Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.