Banking
Access Bank Risks Negative Pressures After Merger—Moody’s
By Dipo Olowookere
Renowned rating agency, Moody’s Investors Service, has warned that Access Bank may experience negative pressures on its capital and asset risk metrics as a result of its merger with Diamond Bank Plc.
This disclosure was made in a statement issued recently, where it announced that it was placing the ratings of the Nigerian lender under review for downgrade.
Moody’s said it was looking to lower the B2 long-term local currency deposit rating of Access Bank as well as its B3 long-term foreign currency deposit rating, its b2 Baseline Credit Assessment (BCA) and Adjusted BCA, its B1 long-term Counterparty Risk Rating (CRR) and its B1(cr) long-term Counterparty Risk Assessment (CRA).
However, Moody’s said it was placing Diamond Bank Plc’s Caa1 long-term deposit ratings, its caa3 BCA and Adjusted BCA, its Caa1 CRR and its Caa1(cr) CRA on review for upgrade.
In late 2018, Diamond Bank and Access Bank announced their intentions to merge to become a big and formidable entity.
In its statements, Moody’s said it was reviewing the banks’ ratings following the approval of their announced merger by the Securities and Exchange Commission (SEC) on January 18, 2019, after a preliminary approval of the transaction by the Central Bank of Nigeria (CBN) in December 2018.
“Access Bank’s ratings are placed on review for downgrade to reflect the potential negative pressures on its capital and asset risk metrics as a result of the merger, while Diamond Bank’s review for upgrade reflects the expected convergence of its creditworthiness and ratings with those of Access Bank upon completion of the transaction,” the agency said.
Moody’s explained that its primary driver underpinning the decision to initiate a review for downgrade of Access Bank’s ratings is the expected weakening of the bank’s solvency profile, driven by a lower tangible common equity (TCE) ratio amid higher asset risks.
It noted that Access Bank will acquire a large balance sheet (about N1.6 trillion as of September 2018), mainly consisting of net loans (about N730 billion), which will increase its risk weighted assets, while Diamond Bank’s undercapitalization will likely strain Access Bank’s TCE.
Moody’s expects Access Bank’s post-merger TCE ratio will decline to around 10%, reducing the bank’s loss absorbance buffers. The TCE would also decline below the median for global peers with b2 BCA.
In addition, the rating agency expects Access Bank’s asset risk to increase because of the additional risk assets it will acquire from Diamond Bank.
The rating agency views Diamond Bank’s risk management and underwriting procedures as weaker than those of Access Bank and therefore expects a higher formation of nonperforming loans (NPLs) from Diamond Bank’s loan book that Access Bank will acquire. The rating agency also expects substantial operational risks to be introduced by this sizeable acquisition.
For Diamond Bank, the review for upgrade is driven by the fact that upon completion of the merger, Diamond Bank’s assets, liabilities and undertakings will be assumed by Access Bank, a stronger entity, who will become the obligor of former Diamond Bank’s creditors.
The review on both banks will conclude upon the legal completion of the merger and will take stock of any new relevant information that might be available at that time.
For Access Bank, the rating agency says that the review for downgrade will focus on (1) the impact of a successful completion of the merger on Access Bank’s solvency ratios (asset risk and capital metrics), (2) the extent to which the merger will improve Access Bank’s profitability and funding and liquidity profiles, and (3) any integration challenges that will arise from onboarding Diamond Bank’s assets and liabilities and staff.
The review will assess how Access Bank will implement measures to increase its capital buffers to enable it to absorb new credit losses that will come from Diamond Bank’s loan book. The rating agency will assess any plans by Access Bank to reduce its risk assets and improve its capital upon completion of the merger.
The review will consider the impact of Diamond Bank’s loan book on Access Bank’s asset quality, including the amount of NPLs that Access Bank will inherit from Diamond Bank, and the level of provisions of the NPLs, although management indicated that a large portion of Diamond Bank’s current NPLs will be written off before conclusion of the transaction.
Moody’s said it will also assess the positive impact of Diamond Bank’s largely retail deposit book to Access Bank’s deposit structure and tenor.
As of September 2018, Access Bank would acquire N1.1 trillion customer deposits from Diamond Bank, providing it with deposits that are cheaper than its current cost of funding. The rating agency will consider the impact of possible revenue enhancements and any long-term cost savings, viewed against short-term restructuring costs.
The review will also take into consideration material implementation challenges associated with the acquisition of a large bank such as Diamond Bank.
As of September 2018, Diamond Bank’s total assets constituted 34% of Access Bank’s assets and Moody’s estimates that Diamond Bank’s total assets will contribute about 23% of merged entity total assets.
Access Bank will need to successfully integrate its newly acquired staff and IT and processing platforms while ensuring that the business does not suffer during the integration period. Moody’s recognizes Access Bank’s good track record in mergers and acquisitions.
Moody’s said the review for upgrade on Diamond Bank’s deposit ratings reflects the prospects that the rated deposits and liabilities of Diamond Bank will benefit from Access Bank’s stronger risk profile, and the rating agency will align Diamond Bank’s long-term deposit ratings with those of Access Bank. These are currently B2 on review for downgrade for local currency, and B3 on review for downgrade for foreign currency.
The rating agency will assess the extent to which Diamond Bank’s current solvency weaknesses that are a result of its high NPLs, low provisions and low capital will be addressed by the merger.
The rating agency will also consider the implication of the merger to Diamond Bank’s foreign currency liquidity, in light of the significant refinancing needs in the first half of 2019.
Moody’s said it will withdraw Diamond Bank’s ratings upon completion of the merger because Diamond Bank will cease to exist as a separate legal entity.
By Aduragbemi Omiyale
On Thursday, January 30, 2025, the board of directors of FBN Holdings Plc will gathered for a meeting, a statement signed by the company secretary, Mr Adewale Arogundade, has disclosed.
This is coming amid the boardroom crisis rocking the financial institution over the leadership of the board headed by popular businessman, Mr Femi Otedola.
Mr Otedela, who sold his stake in Forte Oil, now known as Ardova Plc (AP), a few years ago to invest in the power generating sub-sector through Geregu Power Plc, acquired some shares in FBN Holdings.
Soon after his acquisition was announced, a leadership tussle erupted between him and Mr Tunde Hassan-Odukale, extending to Mr Oba Otudeko.
Some days ago, some shareholders of the company called for the removal of Mr Otedola as chairman of FBN Holdings through an Extra-Ordinary General Meeting (EGM).
The leadership crisis triggered the firm to assure its customers that its operations will not be affected by happenings in the boardroom.
“This matter does not in any way impact the operations of the company, and all the businesses within the Group continue to provide uninterrupted services to its customers.
“We assure our valued customers, shareholders, investors, other stakeholders and the general public that we are taking all necessary steps to protect the interests of the company and its subsidiaries.
“The Group’s performance continues to improve, resulting in a higher market capitalisation even as we work towards surpassing the regulatory minimum capital well ahead of the deadline,” parts of the statement read.
As the company makes efforts to manage the situation, members of the board will meet by the end of this month to “consider its unaudited accounts for the year ending December 31, 2024, on Thursday, January 30, 2025.”
In the notice signed by Mr Arogundade, FBN Holdings said its closed period, which commenced on Wednesday, January 1, 2025, “will continue until 24 hours after the company’s unaudited accounts and 2024 audited financial statements are filed via the issuer’s portal of the Nigerian Exchange (NGX) Limited, in line with Rule 17.18(a) Closed Period Rules, Rulebook of the Exchange, 2015 (as amended).”
A closed period is a timeframe when those who have privileged information about the financial statements of a firm within the organisation are prohibited from trading securities of the company at the exchange.
This is put in place to prevent them from having an undue advantage over shareholders not having any business dealings with the organisation.
By Adedapo Adesanya
A Nigerian digital lending fintech, Allawee, has collaborated with Mastercard to launch a credit-building card designed to enhance financial access for federal civil servants and National Youth Service Corps (NYSC) members.
This product, facilitated by a secure Mastercard platform and issued in collaboration with Providus Bank, and Remita, provides instant access to credit and financial flexibility to over 720,000 federal civil servants and NYSC members all through the Allawee app.
Despite Nigeria’s significant economic potential, over 70 per cent of bank account holders lack access to credit, according to the National Bureau of Statistics (NBS).
The Allawee credit card promises to address this gap, offering a solution that caters to the unique financial needs of Nigerians.
Nigeria as a market is dominated by debit and prepaid cards, so this initiative aims to promote responsible credit usage, combines seamless digital onboarding, user-friendly features, and responsible credit management tools in one platform.
Launched in December 2024, the Allawee credit card supports the Nigerian government’s objective of increasing credit availability to 50 per cent of working Nigerians by 2030. The card offers a secure and seamless way to access credit while helping users build a credit profile, aligning with Mastercard’s mission to drive financial inclusion.
“We are thrilled to collaborate with Allawee on this innovative credit solution, which aligns perfectly with Mastercard’s commitment to bring one billion people into the digital economy by 2025.
“The Allawee credit card provides instant access to credit while also empowering civil servants and NYSC members in Nigerian to build their creditworthiness, further advancing financial inclusion across the country,” said Mrs Folasade Femi-Lawal, Country Manager and Area Business Head for West Africa at Mastercard.
Users can download the Allawee credit card, apply for a loan, receive approval, and start transacting immediately. Once approved, the credit is disbursed directly onto a co-branded card, giving users full control over their funds. The card allows for flexible usage across POS terminals, ATMs, and online transactions, enabling greater financial freedom.
“We launched this card to help Nigerians gain access to instant, affordable credit while building their credit history. Whether it’s handling daily purchases or taking care of life’s emergencies, our customers now have an easy way to cover expenses.
“With Mastercard, we are giving them the convenience to spend their credit at millions of retail locations in Nigeria and around the world, both online and in-store,” said Mr Ikenna Enenwali, CEO of Allawee.
The Allawee credit card offers instant credit access through a fast, secure, and fully digital application process, with wide acceptance at Mastercard online and physical retail locations globally. Customers benefit from flexible repayment options, choosing their credit limits (up to ₦1,000,000) and repaying in installments over four months.
By Adedapo Adesanya
The Nigerian Communications Commission (NCC) has authorised telecommunications companies to disconnect the Unstructured Supplementary Service Data (USSD) codes assigned to nine financial institutions over a N200 billion debt.
The directive signed by NCC’s Director of Public Affairs, Mr Reuben Muoka, on Tuesday and obtained by Channels Television, noted that the affected banks are to pay the outstanding debts by January 27, 2025, or risk losing access to their USSD codes.
According to the NCC public notice, nine out of 18 financial institutions had not complied with regulatory directives.
The affected financial institutions include Fidelity Bank Plc, First City Monument Bank, Jaiz Bank Plc, Polaris Bank Limited, Sterling Bank Limited, United Bank for Africa Plc, Unity Bank Plc, Wema Bank Plc, and Zenith Bank Plc.
It said while other banks have cleared their debts, the total amount initially owed by the financial institutions was reported to exceed N200 billion.
According to the NCC, some of the invoices have remained unpaid since 2020, and has been a source of tussle for years.
“By the information made available to the commission as at close of business on Tuesday, 14th January 2025, of a total of 18 financial institutions, the nine institutions listed below have failed to comply significantly with the directives in the Second Joint Circular of the Central Bank of Nigeria and the commission dated December 20, 2024, for the settlement of outstanding invoices due to MNOS, some since 2020,” a part of the notice read.
The affected USSD codes include *770#, *919#, and *822#, among others, could be reassigned to other applicants if the debts remain unresolved.
The regulator noted that banks’ failure to comply with the CBN-NCC joint circular also means that they are unable to meet the good standing requirements for the renewal of the USSD codes assigned to them by the commission.
It added, “In fulfilment of its consumer protection mandate, the commission wishes to inform consumers that they may be unable to access the USSD platform of the affected financial institutions from January 27, 2025.”
The NCC emphasised that the financial institutions had been duly notified of the need for immediate compliance and warned that consumers may face service disruptions if the issues remain unresolved.
-
Feature/OPED5 years agoDavos was Different this year
-
Travel/Tourism8 years ago
Lagos Seals Western Lodge Hotel In Ikorodu
-
Showbiz2 years agoEstranged Lover Releases Videos of Empress Njamah Bathing
-
Banking7 years agoSort Codes of GTBank Branches in Nigeria
-
Economy2 years agoSubsidy Removal: CNG at N130 Per Litre Cheaper Than Petrol—IPMAN
-
Banking2 years agoFirst Bank Announces Planned Downtime
-
Sports2 years agoHighest Paid Nigerian Footballer – How Much Do Nigerian Footballers Earn
-
Technology4 years agoHow To Link Your MTN, Airtel, Glo, 9mobile Lines to NIN