Banking
Access Bank Eyes Lower Impaired Loans Ratio, Gets Fitch Ratings
By Modupe Gbadeyanka
One of the leading financial institutions in Nigeria, Access Bank Plc, is anticipating to have a reduction in its impaired loans/gross loans ratio to low single digits by end-2020, Business Post has learned.
At the moment, Access Bank has impaired loans/gross loans ratio above the 8 percent average reported by more highly rated domestic peers like Zenith Bank, Guaranty Trust Bank (GTBank) and United Bank for Africa (UBA), all listed on the Nigerian Stock Exchange (NSE).
In March 2019, Access Bank completed its merger with a local tier two lender, Diamond Bank and this resulted in an increase in its consolidated assets of around 30 percent and created Nigeria’s largest bank, with a 23 percent share of deposits (previously 11 percent).
The bank’s franchise is now stronger and Access Bank’s traditional corporate business model is more balanced across retail and SME segments, areas of expertise at Diamond Bank.
In a statement recently, Fitch Ratings, which affirmed the bank’s Long-Term Issuer Default Rating (IDR) at ‘B’ and Viability Rating (VR) at ‘b’, emphasised that the ability of Access Bank to finalise the transaction in a short period of time demonstrated its strong execution skills.
The rating agency stressed that financial profile metrics, particularly in areas such as asset quality and capitalisation, have a higher influence on Access Bank’s ratings and would be monitoring trends in impaired loan write-offs, recoveries and internal capital generation.
“We assess Access’ risk culture as strong compared with domestic peers’ and this framework has proved to be robust over different economic cycles.
“Access Bank’s risk management tools, culture and controls are being implemented across the Diamond network, which we view positively,” it said in the statement obtained by Business Post.
Fitch noted that consolidation of Diamond Bank drove up the stock of impaired loans to N297 billion (end-2018: N55 billion), equivalent to 10.4 percent of total loans at end-March 2019, with only moderate coverage of about 49 percent by specific loan loss allowance.
“Impaired loans are highly concentrated, with the top 20 impaired loans representing around 80 percent of the total stock.
“Management is confident that a number of large impaired loans will be written off in the short- to medium-term and envisages a reduction in the impaired loans/gross loans ratio to low single digits by end-2020,” Fitch said in the statement.
Fitch said it observes that good progress in achieving write-offs, loan repayment and recoveries has already been made, suggesting that asset quality targets may be achieved.
“Currently, Access Bank’s impaired loans/gross loans ratio is above the 8 percent average reported by more highly rated Nigerian banks, namely Zenith Bank, Guaranty Trust Bank and United Bank for Africa.
“Capitalisation was negatively impacted by the Diamond Bank acquisition, which generated N22.7 billion of goodwill. Access Bank’s Fitch Core Capital (FCC)/risk weighed assets ratio fell to 16 percent at end-March 2019 (end-2018: 18.4 percent), well below the 26 percent average for the abovementioned more highly rated Nigerian banks.
“Net impaired loans/FCC ratio increased to 28 percent at end-1Q19 from a negative value at end-2018, albeit we view this level as manageable given Access Bank’s capacity to fully provide for existing impaired loans from annual pre-impairment profits.
“Access Bank’s ability to generate earnings is considerable and management plans to boost core capitalisation through retention of earnings.
“Regulatory capital ratios are being strengthened through subordinated debt issuance but this is not included in our calculation of FCC.
“Access Bank’s loans/deposits ratio improved considerably following the acquisition of Diamond Bank and the deposit mix is more balanced towards low-cost retail and SME deposits, which are proving to be highly stable.
“Access Bank’s higher cost funding base was a rating weakness and the ability to improve the overall funding profile is credit-positive.
“Diamond Bank’s $200 million bond was repaid at end-May 2019 and sufficient foreign currency (FC) liquidity has been earmarked to ensure repayment of additional FC borrowing maturing in 2H19,” the rating firm stated.
By Adedapo Adesanya
Access Bank Plc, the banking subsidiary of Access Holdings Plc, has entered into a binding agreement with South African-based Bidvest Group Limited for the acquisition of 100 per cent equity stake in Bidvest Bank Limited.
The deal for the 24-year-old South African lender is due to be completed in the second half of 2025, upon regulatory approval.
This shows Access Bank’s further expansion plans in line with goals set by its late founder, Mr Herbert Wigwe.
The agreement to acquire 100 percent stake in Bidvest Bank reflects Access Bank’s commitment to strengthening its footprint in South Africa and consolidating on its position as the continent’s gateway to global markets as it seeks to optimise the benefits of recent acquisitions and accelerate its transition towards a greater focus on efficiencies.
Bidvest Bank, founded in 2000 is a niche and profitable South African financial institution providing a diverse range of services, including corporate and business banking solutions and diverse retail banking products.
As of its year ended June 2024, Bidvest Bank reported total assets equivalent of $665million and audited profit before tax of $20million.
Upon conclusion of this acquisition, Bidvest Bank will be merged with the bank’s existing South African subsidiary to create an enlarged platform to anchor the regional growth strategy for the SADC region.
This is coming just as the bank opened a new branch in Malta as part of efforts to focus on international trade finance after obtaining a banking licence from the European Central Bank (ECB) and the Malta Financial Services Authority (MFSA).
Access Bank said the licence marks a transformative milestone in bolstering Europe-Africa trade flows.
The Maltese branch was established by Access Bank UK Limited, the subsidiary of Access Bank Plc, which is also the subsidiary of Access Holdings Plc, which is listed on the Nigerian Exchange (NGX) Limited.
By Modupe Gbadeyanka
To strengthen Europe-Africa trade ties, Access Bank has opened a new branch in Malta. It will focus on international trade finance, employing approximately 30 people in its initial phase, with plans for controlled expansion over time.
It was learned that this Maltese branch was established by Access Bank UK Limited, the subsidiary of Access Bank Plc, which is also the subsidiary of Access Holdings Plc, which is listed on the Nigerian Exchange (NGX) Limited.
Access Bank Malta Limited commenced operations after obtaining a banking licence from the European Central Bank (ECB) and the Malta Financial Services Authority (MFSA).
Access Bank said the licence marks a transformative milestone in bolstering Europe-Africa trade flows.
Malta, a renowned international financial centre, and a gateway between the two continents, is strategically positioned to play a pivotal role in advancing commerce and fostering economic partnerships.
This strategic expansion into Malta enables The Access Bank UK Limited to leverage growing trade opportunities between Europe and Africa.
It underscores the organisation’s commitment to driving global trade, financial integration, and supporting businesses across these regions.
“By establishing operations in Malta, we will gain a foothold in a market that bridges European and North African economies, moving us one step closer to our goal of becoming Africa’s Gateway to the World.
“It further enhances our bank’s capacity to support clients with innovative solutions tailored to cross-border trade and investment opportunities,” the chief executive of Access Bank, Mr Roosevelt Ogbonna, stated.
“Europe has emerged as Africa’s leading trading partner, driven by initiatives such as the Economic Partnership Agreements between the EU and African regions and the African Continental Free Trade Area (AfCFTA).
“With Europe-Africa economic relations entering a new phase, The Access Bank Malta Limited is ideally positioned to deepen trade and meet the financing and banking needs of our clients in these expanding markets,” the chief executive of Access Bank UK, Mr Jamie Simmonds, commented.
Also speaking, the chief executive of Access Bank Malta, Renald Theuma, said, “Malta is uniquely positioned as a bridge between Europe and Africa, making it an ideal location for our subsidiary. This move allows The Access Bank Malta Limited to engage more closely with customers in Europe and deliver tailored financial solutions that drive growth and connectivity across both continents.”
By Adedapo Adesanya
The International Finance Corporation (IFC) and Goldman Sachs have announced a new partnership with African banks, including Nigeria’s Zenith Bank and Stanbic IBTC Nigeria to support the Goldman Sachs 10,000 Women initiative, a joint programme launched in 2008 to provide access to capital and training for women entrepreneurs globally.
The two Nigerian banks are part of nine financial institutions from across Africa which have agreed to join the 10,000 Women initiative committing to leverage the business education and skills tools the programme provides to create more opportunities for women entrepreneurs across the continent by providing access to business education.
Others banks include Stanbic Bank Kenya, Ecobank Kenya, Ecobank Cote d’Ivoire, Equity Bank Group, Banco Millenium Atlantico – Angola, Baobab Group, and Orange Bank.
Speaking on this, Ms Charlotte Keenan, Managing Director at Goldman Sachs said – “10,000 Women has had a powerful impact to date, but we know that there are more women to reach and more potential to be realized.
“We are delighted to partner with IFC to supercharge the growth of women-owned businesses across Africa, and mainstream lending to female business leaders. We remain committed to supporting entrepreneurs with the access to education and capital that they need to scale.”
Since 2008, the 10,000 Women initiative has provided access to capital and business training to more than 200,000 women in 150 countries.
“This expanded initiative marks a significant step forward in creating equitable economic opportunities for women in Africa, enabling them to build stronger, more resilient businesses and to realize their entrepreneurial goals,” said Ms Nathalie Kouassi Akon, IFC’s Global Director for Gender and Economic Inclusion.
Goldman Sachs’ 10,000 Women initiative complements the Women Entrepreneurs Opportunity Facility (WEOF), launched in 2014 by Goldman Sachs and IFC as the first-of-its-kind global facility dedicated to expanding access to capital for women entrepreneurs in emerging markets.
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