Banking
Merger: Fitch Places Diamond Bank, Access Bank on Rating Watch
By Dipo Olowookere
Following the announcement of a proposed merger between Diamond Bank and Access Bank, renowned rating agency, Fitch Ratings, has placed both Nigerian lenders on its rating watch.
In a statement issued by Fitch, it said Diamond Bank’s Long-Term Issuer Default Rating (IDR) has now been downgraded to ‘CC’ from ‘CCC’ and Viability Rating (VR) to ‘cc’ from ‘ccc’ and placed its IDRs and VR on Rating Watch Evolving (RWE).
The agency also simultaneously placed Access Bank Plc on Rating Watch Negative (RWN).
It explained that the downgrade of Diamond Bank’s ratings reflects the deterioration in the bank’s foreign-currency (FC) liquidity position since the last review and an expected deterioration in the bank’s capital position following additional loan impairment charges (LICs) on the announced write-offs of stage 3 loans under IFRS 9, to take place by year-end.
Fitch noted that the Rating Watches (RW) follows a memorandum of agreement between the banks to merge. The merger is expected to be completed by end-June 2019. Although the agreement is subject to regulatory and shareholder approval, Fitch said it believes that the probability of the completion of the merger is sufficiently high to take rating action.
The RWE on Diamond Bank reflects Fitch’s view that its standalone creditworthiness could improve or deteriorate beyond the current ratings, depending on the realisation of the merger and the bank’s ability to meet its upcoming FC obligations prior to it.
The upside aspect of the RWE reflects the view that should Diamond Bank meet its near-term obligations and the merger be completed, it is likely to be positive for the bank’s creditors due to the stronger franchise and financial metrics of the combined entity.
Following completion of the merger, Diamond Bank will cease to exist as a separate legal entity, and Fitch will then withdraw its ratings.
However, the downside aspect of the RWE reflects significant risk with regards to the bank’s near-term FC liquidity position given its large short-term bullet repayments, including a $200 million Eurobond maturing in May 2019, $100 million from Afrexim due in March 2019, and $70 million from the International Finance Corporation due in July 2019.
Fitch said it also understands that some large long-term obligations have recently become current suggesting intensified liquidity pressure.
According to Diamond Bank’s FC liquidity plan, the bank should be able to meet its obligations using existing US dollar liquidity, proceeds from the sale of its UK subsidiary, cash flows from maturing US dollar loans (mainly from oil and gas loans), and by exchanging naira into US dollars through the interbank market.
However, the plan is based on a number of assumptions, including the completion of the sale of the UK subsidiary, which has not yet been approved by the Prudential Regulation Authority in the UK, and therefore liquidity remains tight and highly vulnerable.
Fitch said it also understands that Access Bank may provide some liquidity support to Diamond Bank, although it will not assume a direct liability for Diamond Bank’s debt payments pre-merger.
Fitch point out that Access Bank withdrawing from the deal would most likely be negative for Diamond Bank.
It said the RWN on Access Bank’s Long-Term IDR of ‘B’ and VR reflects the potentially negative impact on its financial metrics from the absorption of a weaker bank and execution risks post-merger.
Upon completion of the merger Fitch will assess the bank’s credit profile. A potential downgrade is likely to be limited to one notch. However, it is also possible that Access Bank’s ratings could be affirmed with a Stable Outlook if the impact from merger appears to be more moderate, given the bank’s currently sound financial metrics and the planned capital raising, and provided there are no additional unforeseen risks emerging from Diamond.
Diamond Bank’s stage 3 loans stood at 37 percent of gross loans at end-1H18. Additionally, the bank’s stage 2 loans stood at 23 percent of gross loans at end-1H18, indicating the extent of its weak asset quality.
Access Bank has better asset quality with stage 3 loans and stage 2 loans accounting for 5 percent and 14 percent of gross loans, respectively, at end-1H18.
Diamond Bank plans to take LICs of between N150 billion-N180 billion before writing off bad loans by end-2018. Diamond Bank’s total equity was N222 billion at end-9M18, meaning that its capital position at end-December 2018 following the write-offs will be materially weaker.
For regulatory capital calculations, Fitch said it understands that as per the central bank’s IFRS 9 transition guidelines, Diamond Bank will be able to phase-in the impact of additional LICs on its total capital adequacy ratio (CAR) over a four-year period, allowing it to remain above its 10 percent minimum regulatory requirement.
Access Bank estimates that its CAR should stand at around 20 percent (above its minimum regulatory capital requirement of 15 percent) post-merger, which will be helped by the expected $250 million Tier 2 capital issuance in January 2019 and strong retained earnings.
Fitch explained that the banks’ National Ratings reflect their creditworthiness relative to Nigeria’s best credit and relative to peers operating in the country. Diamond Bank’s National Long- and Short-Term Ratings have been downgraded to ‘CCC’ and ‘C’, respectively, from ‘B’ and ‘B’, reflecting its weaker credit profile relative to peers, it said.
It noted that Diamond Bank’s National Ratings have also been placed on RWE based on expectation that its assets and liabilities will be transferred to Access Bank’s balance sheet, but also that its credit profile may deteriorate further relative to peers’ in the interim, adding that the RWN on Access Bank’s National Ratings indicates potential downside risks of the merger.
Fitch said Diamond Bank’s senior unsecured debt rating has been downgraded to ‘CC’/’RR4’ from ‘CCC’/’RR4’, with the lender’s senior unsecured debt rating also placed on RWE, reflecting that on its Long-Term IDR. It stated that the Long-Term Ratings on Access Bank’s senior unsecured and subordinated debt have been placed on RWN, reflecting that on its Long-Term IDR.
By Adedapo Adesanya
Nigeria’s newly merged lender, ProvidusUnity Bank, says it hopes to accelerate financial inclusion, strengthen lending capacity, and support Nigeria’s economic growth.
The new bank, made up of Providus Bank and Unity Bank, is set to commence operations as a single unified institution following the successful completion of their business combination and the conclusion of all required regulatory, shareholder, and judicial processes.
A statement from the bank on Sunday stated that the newly formed entity represents a consolidated banking institution positioned to strengthen capitalisation, expand national coverage, deepen financial inclusion, and support Nigeria’s long-term economic ambitions.
The merger brings together Providus Bank’s innovation-driven, customer-centric service model and digital capabilities with Unity Bank’s extensive geographic reach and established market presence, creating a broader platform for retail, SME, and corporate banking services across the country.
The development aligns with ongoing reforms in Nigeria’s financial sector aimed at strengthening institutional resilience, safeguarding depositor confidence, improving competitiveness, and building banks capable of supporting economic transformation.
The bank expressed appreciation to the Central Bank of Nigeria (CBN) for its role in facilitating the transaction and for its commitment to strengthening the banking system. It also acknowledged the support of shareholders, customers, employees, and other stakeholders.
ProvidusUnity Bank said the merger is expected to enhance Nigeria’s financial sector capacity to mobilise investment, support enterprise development, expand access to credit, and contribute to the country’s aspiration of building a trillion-dollar economy.
Earlier this month, the Supreme Court ordered the transfer of all assets, liabilities and undertakings, including real properties, of Unity Bank to Providus Bank in accordance with the approved Scheme of Merger. The merger between the two lenders was challenged by customers and shareholders of the affected banks, Mr Suleiman Abubakar and Mr Mohammed Goni Modu.
The apex court held that the appeal lacked merit and accordingly dismissed it in its entirety, while imposing costs of N10 million in favour of each respondent. As part of the merger arrangements, the apex court approved a consideration of N3.18 per share or 18 Providus Bank shares of 50 kobo each for every 17 Unity Bank shares held by shareholders.
For customers, the new bank said the integration will deliver expanded access, improved service delivery, stronger technology infrastructure, broader banking channels, and a wider national footprint designed to improve consistency and efficiency of services.
It added that customers should expect continuity in service in the immediate term, with gradual access to enhanced products and broader capabilities over time.
For employees, the bank said the transaction represents continuity, opportunity and stability, adding that it remains committed to retaining talent, preserving institutional knowledge and supporting career growth within the new organisation.
By Modupe Gbadeyanka
The need for stronger collaboration to address climate change, advance conservation and equip young people to lead a more sustainable future has been emphasised by Union Bank.
At a symposium organised to commemorate 2026 World Environment Day in partnership with the Nigerian Conservation Foundation (NCF) at the Lekki Conservation Centre in Lagos, the financial institution urged businesses to match their commitments with action and pointed to the decisive role of finance in shaping a greener economy.
“As a bank that has been part of Nigeria’s story for over a century, Union Bank recognises that sustainable development and environmental responsibility must go hand in hand,” the company’s Chief Brand and Marketing Officer, Mrs Olufunmilola Aluko, stated.
“We believe businesses have a role to play not only in what they say, but also in what they do. Banks play an important role because they help determine where capital flows. The choices financial institutions make about what to fund and what to encourage help shape the kind of economy we build. This is a responsibility we take seriously at Union Bank, and it is one of the reasons gatherings like these matter to us,” she added.
In his keynote address, the Director General of NCF, Mr Joseph Daniel Onoja, framed conservation as a matter of human survival, noting that “nature has placed all the models that we need to be able to live well in it.”
“When we talk about nature conservation or environmental conservation, we’re saying human conservation because nature, Mother Earth, will always take care of herself.
“If we don’t take care of it, it will take care of itself by getting rid of us. Now, it is in our best interest to take care of the earth and learn from her, because she has provided everything we need to do so,” he further submitted.
A panel session featuring secondary school students from within and beyond Lagos brought an intergenerational dimension to the day. The students urged businesses and individuals to prioritise climate-conscious investments and cleaner energy sources, and exhibited innovations that turned waste into interior décor and clean energy.
Their work offered a vivid illustration of Sustainable Development Goal 12 on responsible consumption and production, and of the creativity a younger generation brings to the climate conversation.
This year’s World Environment Day theme, Inspired by Nature. For Climate. For Our Future, and the event, reflected a growing global consensus, captured in Sustainable Development Goal 13 on climate action and Sustainable Development Goal 17 on partnerships, that no single institution can meet the climate challenge alone.
By Adedapo Adesanya
The Bank of Agriculture (BOA) has unveiled a strategic roadmap aimed at modernising its operations, expanding grassroots financial inclusion and accelerating agricultural transformation in line with the Federal Government’s food security agenda.
The chief executive of the bank, Mr Ayodeji Sotinrin, disclosed this in a statement issued on Friday that the institution is implementing operational upgrades and forging strategic partnerships to improve the delivery of agricultural intervention programmes and empower smallholder farmers across the country.
According to the statement, the BOA is strengthening its agricultural delivery architecture by expanding collaborations with state-level delivery platforms, licensed input suppliers and international development partners.
A key component of the strategy is a recently signed Memorandum of Understanding with the United Nations Development Programme (UNDP), aligning the bank’s revitalisation agenda with the UN agency’s Integrated Smart States Programme.
The bank said the partnership would help transform Nigeria’s agricultural sector into an investment-ready system capable of attracting blended and climate finance while supporting the One Million Hectare Tree Crop Initiative, described as a presidential priority expected to boost commercial agriculture, job creation and export diversification.
“Our vision for the Bank of Agriculture is to deploy capital in an intelligent, smart, and highly efficient way to reposition the institution as a catalyst for food security and rural prosperity. We are bringing everyone into the financial net, especially the youthful population of farmers in our hinterlands, to create a new, resilient food system for Nigeria,” Mr Sotinrin said.
The bank also disclosed that it had overhauled its verification framework to eliminate fraudulent beneficiaries and ensure interventions reached genuine farmers.
According to the statement, the new credit profiling process incorporates Bank Verification Number checks, Know Your Customer protocols and GPS farm mapping to strengthen transparency and accountability in loan disbursement.
Commenting on the initiative, the National President of the All Farmers Association of Nigeria, Muhammad Magaji, endorsed the verification measures while urging quicker loan disbursement.
“The All Farmers Association of Nigeria recognises the critical role the Bank of Agriculture plays in shielding our farmers from exorbitant commercial interest rates. While we continuously advocate for faster disbursement cycles to match planting seasons, we stand with the BOA on the need for strict verification.
“It is the only way to ensure that these interventions reach the genuine smallholder farmers who actually till the soil, rather than ‘political farmers.’ We remain committed to working closely with the BOA management to fine-tune this delivery framework,” he added.
The BOA further said it is modernising its nationwide operations by deploying digital farmer systems, agency banking models and solar-powered infrastructure across its 110 branches to improve service delivery in rural communities.
It added that recent ICT infrastructure support from the UNDP would strengthen its digital transformation efforts and enable the bank to provide financial and extension services directly to farmers.
The bank said it would continue engaging commodity associations, verified grassroots cooperatives and other agricultural stakeholders through town hall meetings and working groups to identify genuine beneficiaries and support the implementation of the National Agri-food System Investment Plan.
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