Banking
Coronation Merchant Bank’s Management Has High Degree of Credibility—Fitch
By Modupe Gbadeyanka
A renowned global rating agency, Fitch Ratings, says the management team of Nigeria-based Coronation Merchant Bank Limited has demonstrated “a high degree of credibility.”
In a statement to announce the rating of the bank’s Long-Term Issuer Default Rating (IDR) at ‘B-‘ with a negative outlook, Fitch said the company’s “strategy is well defined although execution could be hampered under current difficult operating conditions.”
In the statement made available to Business Post on Monday, it was stated that apart from the management quality being “a relative strength,” it was equipped with “experience and depth commensurate with the complexity of the business.”
The rating agency noted that the company has good asset quality, reporting a zero impaired loans (IFRS 9 Stage 3)/gross ratio at end-1H20, which has also been the case for the last four financial years.
“This reflects the bank’s lower risk business model and risk management capability,” it noted.
“Given the severity of the economic crisis, we expect a modest rise in Stage 2 and Stage 3 loans over the next 18 months.
“Asset quality risks are exacerbated by very high credit concentrations by the borrower and significant foreign-currency-denominated trade loans (forming 60% of total loans at end-1H20),” the statement said.
It was noted that bank’s viability rating (VR) was put at ‘b-‘, while the national long-term rating was put at ‘BBB(nga)’ to reflect Nigeria’s (B/Negative) challenging and volatile operating environment, which influences the firm’s financial and non-financial rating factors.
“The negative outlook on Coronation Merchant Bank’s long-term IDR reflects our view that prevailing operating conditions create downside risks to our assessment of the bank’s funding and liquidity profile as well as pressure on asset quality and earnings, but there is a degree of tolerance in these factors,” it said.
Fitch said in the statement that the lender’s primary risk exposure is to short-term (up to one year) self-liquidating corporate loans and traditional trade finance and Nigerian treasury bills.
“This is balanced by the bank’s good management of credit and market risks. Operational risk is inherent in the business but losses are low,” it said.
It was stated that the bank is well-capitalised, reporting Tier 1 and total capital adequacy ratios of 16.6 per cent and 17.2 per cent, respectively, at end-1H20.
“However, capital ratios have modestly declined from end-2019 due to fast growth and currency devaluation. Fitch expects further modest capital pressure to come from lower earnings,” it said.
The statement said the company’s corporate deposits are highly concentrated by name and around 17 per cent were in foreign currency at end-1H20.
“Given the nature of its trade finance business, the bank has a reliance on short-term foreign currency funding (around 25 per cent of its total foreign currency funding), which could decline if sovereign risks rise, leading to pressure on foreign currency liquidity.
“Balance sheet liquidity is underpinned by the short-term nature of the bank’s trade finance assets and large holdings of liquid assets. The bank is highly liquid in local currency but conversion to foreign currency is challenging under current market conditions,” Fitch said.
Coronation Merchant Bank, a leading independent merchant bank, was established in 2015, and it engages in corporate and trade finance, domestic capital markets and investment banking.
But its funding structure is a relative rating weakness as the bank is funded entirely by price and confidence sensitive wholesale funding, including corporate deposits, short-term bank borrowings and commercial paper. Around 37 per cent of the firm’s non-equity funding was in foreign currency at end-1H20.
By Aduragbemi Omiyale
The Central Bank of Nigeria (CBN) has reaffirmed that the old and new Naira notes will continue to be used for financial transactions in the country beyond December 31, 2024.
There had been rumours that the old and redesigned N200, N500, and N1,000 banknotes would no longer be legal tender from Wednesday, January 1, 2025, because the central bank would phase out the notes in compliance with a Supreme Court judgement of November 29, 2023.
But the apex bank, in a statement signed by its acting Director of Corporate Communications, Mrs Hakama Ali, on Friday, clarified that the apex court’s judgement being cited did not authorise the bank to phase out the banknotes by the end of this year.
According to her, the court allowed the CBN to leave the old and new notes to be used concurrently until it decides to gradually phase out the former.
The central bank’s spokesperson urged members of the public to disregard claims suggesting the old series of these denominations would cease to be valid at the end of this year.
She urged them to continue to accept all Naira notes for daily transactions, encouraging banks to also adopt alternative payment methods such as electronic channels to reduce the pressure on physical cash usage.
“The Central Bank of Nigeria (CBN) has observed the misinformation regarding the validity of the old N1000, N500, and N200 banknotes currently in circulation.
“In line with the bank’s previous clarifications and to offer further assurance, the CBN wishes to reiterate that the subsisting Supreme Court ruling granted on November 29, 2023, permits the concurrent circulation of all versions of the N1000, N500, and N200 denominations of the Naira indefinitely.
“For the avoidance of doubt, all versions of the naira, including the old and new designs of N1000, N500, and N200 denominations, as well as the commemorative and previous designs of the N100 denomination, remain valid and continue to be legal tender without any deadlines,” the statement noted.
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.”
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