Banking

Access Bank Risks Negative Pressures After Merger—Moody’s

Published

6 years ago

19/02/2019

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.

Banking

Seven Innovators Share N145m at 2024 Wema Bank Hackaholics

Published

2 hours ago

29/11/2024

Modupe Gbadeyanka

By Modupe Gbadeyanka

About N145 million was won by seven innovators at the grand finale of the Hackaholics 5.0 organised by Wema Bank Plc in Lagos, with the overall winner of the contest, Feegor, going home with N50 million for its innovative B2B wholesale marketplace and SaaS platform.

Feegor empowers small businesses to discover, negotiate, and source goods from verified suppliers while accessing credit through a Buy Now Pay Later (BNPL) model.

The first runner-up, Empayment AI, got N35 million for its AI-powered invoice discounting platform, revolutionizing how businesses manage payments.

Bloom Beauty, the second runner-up, was awarded N20 million for its personalized, AI-curated solutions that are transforming the beauty industry.

In the women-led category, MyTherapist secured the position of first runner-up, earning N12 million. MyTherapist connects users with mental health professionals, providing accessible and affordable therapy solutions for emotional well-being.

Meanwhile, MyItura, an innovator delivering remote healthcare services, clinched the position of second runner-up in the women-led category, receiving N8 million.

Both Northino and University X earned honourable mentions at the grand finale, each receiving N10 million. Northino was recognized for bridging traditional knowledge and modern technology through digital skills training for African native speakers, while University X was impressed with its transparent, all-encompassing platform for tertiary education management.

“We are delighted to celebrate the brilliance of our youth through the Hackaholics initiative. At Wema Bank, we are more than a bank; we are enablers of dreams and drivers of transformation.

“When I stood here earlier, the total prize money was N75 million. But, inspired by the potential we saw, we decided to increase the total prize pool to N145 million.

“Wema Bank’s legacy of 79 years remains rooted in innovation, and with initiatives like Hackaholics, we continue to empower lives and shape the future,” the chief executive of the lender, Mr Moruf Oseni, stated.

Also, his counterpart at Feegor, Ugonna Ginigeme, said, “I feel very grateful to God, my team, and everyone who has been part of this journey. Winning among so many great startups and entrepreneurs is humbling.

“I sincerely thank the MD, Wema Bank, and its management for this incredible opportunity. These are still early days, but we are determined to keep working, building, and creating a positive impact for SMEs and the Nigerian economy while building an all-around successful company.”

Business Post gathered that this year’s Hackaholics stood out with a record-breaking 3,500 applications from across Nigeria. From this pool, 10 finalists showcased innovative solutions addressing real-world challenges, ranging from education accessibility to sustainable agriculture, healthcare, and more.

Banking

CBN, Fagbemi Express Fears Over Rising MDAs’ Judgement Debts

Published

2 hours ago

29/11/2024

Adedapo Adesanya

By Adedapo Adesanya

The Central Bank of Nigeria (CBN) has joined the Attorney General of the Federation (AGF) and Minister of Justice, Mr Lateef Fagbemi (SAN) to raise an alarm over increasing judgment debts against Ministries, Departments and Agencies (MDAs) of the federal government.

The parties expressed this concern while speaking in Abuja at the 2024 roundtable with legal advisers of MDAs.

The apex bank disclosed that in 2015, the number of cases stood at 441, adding that this has since increased exponentially in terms of volume to 1,629 and also in financial value since then.

Among major concerns was that the sporadic rise in judgment debts recovered through garnishee orders by the courts threatened the availability of funds for development in the country.

The Deputy Governor of the central bank for Corporate Services, Mr Bala Bello, traced the increase to the introduction of the Treasury Single Account (TSA) policy of the federal government in August 2015.

Mr Bala, who was represented by the Director for Legal Services at CBN, Mr Kofo Salam-Alada, said: “It is also pertinent to point out that prior to 2015 the number of cases stood at 441 and has since increased exponentially in terms of volume to 1629 and also in financial value, post-2015.

“Our inquisition on this development revealed that the upturn was a result of apathy by most MDAs towards adequately defending their cases in court, which in most cases will result in a judgement against the MDA”.

He stated that to address the issues, stakeholders must demonstrate a commitment towards the adoption of appropriate case management strategies and standardised practices across MDAs.

Mr Bala added that the purpose of the roundtable was to jointly come up with solutions to tackle the disturbing situation.

“We all know that our country Nigeria is faced with dwindling income and escalating expenditure. This also makes it imperative for us all to put on our thinking caps and participate actively in this session in order to safeguard the limited resources available to the country.

“The CBN remains committed to playing its role as banker and providing economic and financial advice to the federal government,” he added.

On his part, the AGF in his speech expressed happiness with the CBN, particularly the legal department of the bank for the initiative and collaborative efforts with the Federal Ministry of Justice to rescue government agencies from mountains of judgement debts.

“Let me reiterate that as legal advisors to the government, we play a pivotal role in shaping the legal landscape of our nation, safeguarding the state’s assets, avoidance of undue embarrassment to government, and ensuring the smooth functioning of public services.

“Our work touches every facet of public life, from reviewing and rendering appropriate and sound legal advice to defending the government’s interests in court. It is important to note that the quality of our work directly impacts the effectiveness and legitimacy of government actions.

Mr Fagbemi, who spoke through the Solicitor General of the Federation and Permanent Secretary, Federal Ministry of Justice, Mrs Beatrice Jedy-Agba, stressed the importance of providing exceptional legal services by approaching each case with diligence, professionalism, high ethics, integrity, and commitment to upholding public policy.

“Let me use this opportunity to state that the government will no longer condone instances of liability arising from compromises, lack of diligent prosecution/defence of cases, or sheer incompetence exhibited by attorneys acting on behalf of the government.

“While we will take measures to recognise and reward diligence, we will not hesitate to apply appropriate sanctions to officers who have failed to live up to the ethics of both the profession and the public service”, he added.

Banking

Zenith Bank Expands Global Footprint With New Branch in Paris

Published

7 hours ago

29/11/2024

Aduragbemi Omiyale

By Aduragbemi Omiyale

A new branch of Zenith Bank Plc has been opened in Paris, the capital of France, by the United Kingdom subsidiary of the Nigerian lender.

This followed the granting of the final approval by France’s banking regulator, the Autorité de Contrôle Prudentiel et de Résolution (ACPR), in September 2024, allowing the branch to commence operations.

Earlier in November 2023, Zenith Bank strengthened ties with France by signing a Memorandum of Understanding (MoU) with the French Government to establish a subsidiary in France.

The MoU was signed in Lagos by the Founder and Chairman of Zenith Bank Plc, Jim Ovia, CFR, and the French Minister for Trade, Attractiveness and French Nationals Abroad, Mr. Olivier Becht during the French envoy’s visit to Nigeria.

The chief executive of Zenith Bank, Ms Adaora Umeoji, described the opening of the branch as “part of the broad strategy of the bank to extend its footprints across the major global financial centres and our efforts at following our customers’ businesses.”

“[The] Paris branch opening underpins the need to serve our customers and bolster trade and finance relationships between our customers in France and other countries. Zenith Bank’s expansion into France is a very strategic move as Nigeria accounts for 20 per cent of France’s trade with Sub-saharan Africa according to the Franco-Nigeria Chamber of Commerce and Industry (FNCCI).

“Having successfully dominated large parts of Anglophone Africa, we will leverage Zenith Bank Paris operations to lead the Francophone market starting from the Ivory Coast and Cameroun where we will be establishing subsidiaries very soon.

“This will facilitate business and trade flows between the African region and France, which is a major business partner to several African countries,” she said.

Also speaking at the opening of the branch on Wednesday, November 27, 2024, at 21 Rue de la Paix, Paris, the Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, said, “I feel that one of the dividends of building trust for Nigerian institutions around the world is this event today, the opening of Zenith Bank in Paris.

“The presence of Zenith here can only help to engender trust of the French business community. They can learn about the opportunities in Africa, and of course, entry into Nigeria can be facilitated. We are happy and we are glad that we are all here to participate in this historic occasion.”