Connect with us

Banking

Access Bank Risks Negative Pressures After Merger—Moody’s

Published

on

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.

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via dipo.olowookere@businesspost.ng

Continue Reading
Click to comment

Leave a Reply

Banking

London Stock Exchange Lists Ecobank Nigeria’s $300m Bond

Published

on

Ecobank London Stock Exchange

By Aduragbemi Omiyale

The five-year fixed rate senior unsecured $300 million bond issued by Ecobank Nigeria Limited has begun trading on the floor of the London Stock Exchange (LSE).

This followed the listing of the corporate debt instrument on the respected trading platform on Thursday via a virtual ceremony witnessed by officials of the exchange and the financial institution.

The paper has an issuer rating of B- from Fitch Rating agency and S&P, while Citi, Mashreq, Renaissance Capital and Standard Chartered Bank acted as joint lead managers and book runners.

Business Post reports that the note carries a coupon rate of 7.125 per cent, significantly below its Initial Price Thoughts of 7.75 per cent.

The successful launch was three times oversubscribed and is the lowest coupon/yield by a Nigerian financial institution for a benchmark bond transaction since 2013.

“The strong demand for our bond shows the international appetite for the Ecobank franchise in Nigeria, its unique positioning for facilitating pan-Africa trade and the attractive opportunity for the many investors seeking to back world-class Nigerian corporates,” the Managing Director of Ecobank Nigeria, Mr Patrick Akinwuntan, said.

It was gathered that proceeds will provide medium-term funding and help to enhance the capacity of the bank to support international trade and service across Africa.

Ecobank Nigeria, a subsidiary of Ecobank Transnational Incorporated (ETI), the parent company of the Ecobank Group, provides the full suite of banking products, services and solutions through multiple channels to retail, commercial, corporate and public sector customers.

Continue Reading

Banking

Keystone Bank Boosts Lagos Environmental Sanitation

Published

on

By Modupe Gbadeyanka

The Lagos State government’s environmental sanitation efforts recently received a huge boost when the new intakes of Keystone Bank Limited donated some kits to the Lagos State Waste Management Authority (LAWMA).

The new employees, who recently graduated from the bank’s training school, The Keystone Bank Learning Academy Lagos, gave the agency 60 units of street sweepers’ uniforms.

This is aimed to boost the morale of the personnel, who work hard to keep the city very clean and it was part of the bank’s Corporate Social Responsibility (CSR) drive.

“Keystone Bank is committed to sustainability and therefore has made it a point of duty for our trainees (newly hired fresh graduates) to buy into this concept from the elementary stage of their banking career.

“Each set of banking school trainees are made to carry out a specific CSR project, which they must fund to enable them to learn the act of giving back to the society,” the Head of Learning Academy at Keystone Bank, Mr Bimbo Alabi, was quoted as saying in a statement issued by the financial institution.

He added that Keystone Bank was keenly aware that the burden of keeping the environment clean cannot be left to the state government alone, hence the intervention by the bank.

“At Keystone Bank, we are always willing to partner with organisations that are committed to keeping the environment clean, especially in the communities where we operate.

“We cannot live a healthy life, conduct business, and create wealth amidst a sick environment,” Mr Alabi noted.

While receiving the uniforms from the Keystone Bank trainees, the Managing Director of LAWMA, Mr Ibrahim Odumboni, commended the lender for being alive to its CSR in partnering with the state government to keep the environment clean.

Mr Odumboni further called on other corporate bodies to emulate the gesture of Keystone Bank for the benefit of the larger society.

The Keystone Bank Learning Academy is a full-fledged certified and accredited learning and development centre, responsible for the continuous building of skills and the expansion of the knowledge base of new and existing workers of the bank.

Continue Reading

Banking

SEC DG Pushes for Sustainability, Safety, Soundness of Banking Sector

Published

on

banking sector trade finance

By Modupe Gbadeyanka

The need to ensure the sustainability, safety and soundness of the banking and finance industry has been emphasised by the Director-General of the Securities and Exchange Commission (SEC), Mr Lamido Yuguda.

To achieve this, the capital market expert has advised senior bankers in the nation’s banking sector to mentor the younger generation.

According to him, their commitment to mentoring the younger generation would go a long way in actualising the objectives of the Chartered Institute of Bankers of Nigeria (CIBN)’s mentoring scheme.

Mr Yuguda, who was a guest at the CIBN mentoring scheme tagged Mentoring: Unlocking Career Potentials and Possibilities in Lagos over the weekend, noted that, “Let me use this opportunity to encourage senior bankers to collaborate with CIBN in actualising the objectives of the mentoring scheme. Your commitment to mentoring the younger generation will go a long way in ensuring the sustainability safety and soundness of the banking industry.

“To the young bankers, I enjoin you to make the best use of this rare opportunity! I am confident that with the cooperation of all stakeholders, the CIBN mentoring scheme will be a point of reference for others,” he further said.

The SEC boss stated that to be a successful professional, one must be ambitious, willing to go the extra mile, try to be a value enhancer and must be outstanding.

He said that such a person must be teachable and willing to learn from other persons who are deemed successful in the same career path.

According to him, it is critical for young bankers to be mentored by seasoned senior colleagues as they progress in their careers because the banking profession is predicated on trust and professionalism.

Mr Yuguda said these values could be taught but are actually reinforced when demonstrated by senior bankers and emulated by their younger colleagues.

“Due to the peculiarities of the banking industry, it is easy for young bankers to get distracted with the prestige and sometimes material benefits that come with the profession.

“However, mentorship relationships help to keep such young professionals grounded and focused on building character, advancing their knowledge, growing their professional network and cultivating the right values.

“This is important because what makes success sustainable for a professional is a combination of skill, experience and the right values,” the SEC director-general said.

Earlier, the CIBN President, Mr Bayo Olugbemi, said that the institute had identified mentoring as a potent tool for bridging the gap between learning and doing.

“Esteemed audience, the changing times requires that we do things differently; the changing times require that we do things differently.

“At the CIBN, we believe so much that to maintain safety, soundness and stability of the banking industry, the human capital has a pivotal role to play in this wise.

“We have identified mentoring as a potent tool for bridging the gap between learning and doing.

“In order to uphold ethics and professionalism which is the hallmark of our banking industry and our great institute, accomplished and experienced bankers need to mentor the young and upcoming ones in order to sustain the ideals of our industry,” he said.

Continue Reading

Banking

Ecobank, Small World Sign Remittances Deal

Published

on

Ecobank Nigeria

By Ahmed Rahma

The desire to expand its remittances reach within Africa, Europe and other parts of the world has made a leading international money transfer provider, Small World Financial Services (Small World). to sign a deal with Ecobank Group 

Small World believes that its partnership with the leading lender in Africa will accelerate the growth of its global customer base as well as its 250,000 pick-up locations.

However, both parties will benefit from the partnership and will further boost financial inclusion in Africa.

It was gathered that Small World customers can now have access to the unparalleled Ecobank Africa-wide network in three ways which include direct transfer to bank accounts; mobile wallet; and cash pick up at any Ecobank location.

Ecobank will make available the Ecobank Xpress Account for the recipients of remittances sent by Small World.

“We are delighted to be forging a partnership with Ecobank.

“It is a leading bank in Africa with over 50,000locations in the region which means our global customers get access to even more ways to send money home to African countries.

“Importantly, Ecobank shares our commitment in delivering great customer service alongside providing fast, affordable and reliable transfers,” the founder of Small World, Nick Day, said.

Also commenting, the Ecobank Group Consumer Banking Head, Nana Araba Abban, stated that, “We’re proud to offer seamless payments across our vast borderless network in Africa.

“At Ecobank, we value partnerships, such as this, that enable Africans in the diaspora to remit money affordably and conveniently.

“This provides a win-win partnership as Ecobank can offer banking services to Africans wherever they are on the globe.

”Ecobank shares Small World’s commitment of making financial services seamless, convenient, and interoperable across Africa.”

Continue Reading

Banking

WorldRemit Lauds CBN’s USD Bank Account Opening Policy

Published

on

worldremit Funds Transfer

By Ahmed Rahma

A leading cross-border digital payments service, WorldRemit, has strictly adhered to the directive of the Central Bank of Nigeria (CBN) that all banks should facilitate money transfers by automatically opening US dollar accounts.

The apex bank also stated that a $2,000 withdrawal limit will apply to these accounts, explaining that it was to ensure that transactions do not fail due to a recipient not having a US dollar bank account.

According to the central bank, this development will also promote transparency by guaranteeing that all recipients receive an exchange rate that reflects the market rate.

Reacting to this policy, the Country Manager of Nigeria and Ghana at WorldRemit, Mr Gbenga Okejimi, said they were very pleased by the CBN’s decision to mandate Nigerian banks to help citizens who do not have a USD account by automatically providing this facility on their behalf.

“This development will make all the difference to those who receive support from family and friends abroad.

“For our part, we are excited by the fact that we can continue to enable the transfer of remittances to more people across Nigeria whilst also supporting the Nigerian government in its efforts to strengthen the economy,” Okejimi said.

“When our founder came up with the idea to create WorldRemit, it was with the ultimate goal of ensuring that the diaspora community could send money back home easily and through a safe platform.

“I am proud to say that we are constantly evolving, innovating and adapting to ensure that our customers’ needs are met efficiently,” he said.

WorldRemit recently announced the expansion of its US Dollar payout option with nine of its existing bank partners. This development makes it an International Money Transfer Organizations (IMTO) with one of the broadest and largest USD payout networks in Nigeria.

Customers of FCMB, First Bank, Access Bank, Fidelity Bank, GT Bank and UBA can now also access USD payout through the bank transfer and cash pickup options.

Those receiving transfers into Union Bank, Polaris Bank and Zenith Bank accounts can access USD payout only through the cash pickup option.

Continue Reading

Banking

Comviva’s Banking Suite Gets Omdia’s Recognition

Published

on

Comviva mobiquity Banking Suite

By Modupe Gbadeyanka

Another feather was added to the already-beautifully decorated cap of Comviva as its banking suite designed by mobiquity was given a mention in research from Omdia.

Omdia, formerly known as Ovum, is one of the world’s leading research and consultancy companies and in its report, it emphasised the role being played by Comviva’s mobiquity banking suite in the global digital banking ecosystem.

In the study titled Omdia Universe: Selecting a Digital Banking Platform, 2020–21 Comviva was ranked high on “customer experience” and its mobiquity® Banking Suite judged to be a “very innovative solution” based on recommendations from clients.

The report highlighted that Comviva has an agile platform and a team that can react quickly to industry trends and has the capability to innovate at a faster pace without being burdened with cumbersome legacy product solutions.

Comviva’s particular strength lies in supporting a variety of payment rails including digital wallets, P2P payments, QR codes, and A2A payments, and a modular architecture which has been built keeping instant payments in mind.

Speaking on the recognition, Srinivas Nidugondi, EVP and COO, Digital Financial Solutions at Comviva said, “We are thrilled to be listed by one of the world’s leading research and consultancy company Omdia in their report Omdia Universe: Selecting a Digital Banking Platform, 2020–21.

“This mention is a testimony to the fact that we are delivering world-class digital banking solution to our clients.

“We are proud that our mobiquity® Banking Suite is helping multiple banks in Asia Pacific, Middle East, Africa and Latin America to deliver digital-first banking experience to consumers creating value for them.”

The Comviva’s mobiquity® Banking Suite provides a comprehensive solution to banks and financial institutions to build, manage, optimize and deliver the multi-channel banking experience, as well as continuously iterate and engage the consumers, through instant configuration capability, personalization and experimentation engine.

It also delivers seamless, swift and secure digital payments to the customers, by facilitating prepaid wallet and leveraging technologies such as HCE, tokenization and QR Code.

The report gives a detailed and holistic view of the leading vendors, to help the CIO, heads of digital, and digital channel executives select the digital banking platforms that fulfil their specific digital transformation ambitions.

Continue Reading

Trending

%d bloggers like this: