Access Bank Controls 17% of Nigerian Banking Assets –Fitch
Access Bank controls 17% of Nigerian banking assets in 2023, details from latest ratings note by Fitch showed. In its latest credit rating update, Fitch Ratings said it has affirmed Access Bank Plc’s Long-Term Issuer Default Rating (IDR) at ‘B-‘ with a positive outlook.
Also, Fitch affirmed the bank’s National Long-Term Rating at ‘A+(nga)’ with a stable outlook. It said Access Bank’s credit ratings are driven by its standalone creditworthiness, as expressed by its viability rating (VR).
The Nigerian lender’s viability reflects the bank’s high sovereign exposure relative to capital and the concentration of its operations in Nigeria, according to Fitch. It said Access Bank’s National Long-Term Rating balances its leading franchise against weaker core capitalisation and profitability than higher-rated peers.
Access Bank is Nigeria’s largest banking group, accounting for 17% of banking system assets at the end of 2023, Fitch Ratings said. It noted that Access Bank has acquired several small banks in other Sub-Saharan African countries in recent years, in line with its African expansion strategy.
Fitch said it expects acquisitions to continue, strengthening Access Bank’s franchise and geographical diversification. The rating note said Access Bank has a record of integrating domestic acquisitions, but the large number of cross-border acquisitions creates execution risks and may pressure financial metrics.
Fitch said the bank’s single-obligor credit concentration is moderate, with the 20 largest loans representing 124% of Fitch Core Capital (FCC) at the end of first quarter of 2024.
Its oil and gas exposure reached 18% of gross loans in 2023, and Fitch stated that this is material but lower than at other domestic systemically important banks (D-SIBs). It also said the bank’s exposure to Nigerian sovereign securities and Central Bank of Nigeria cash reserves is very high.
In terms of asset quality, Access Bank’s impaired loans (Stage 3 loans under IFRS 9) ratio declined to 3.1% in 2023 from 3.4% in 2022. Analysts said Stage 2 loans also declined to 7.5% of gross loans from 8.3% in 2022.
The bank’s specific loan loss allowance coverage of impaired loans settled at 31%, and Fitch considered the ratio low due to a reliance on collateral. Fitch forecasts that Access Bank impaired loan ratio will increase moderately in the near term.
Access Bank delivers sound profitability, as indicated by operating returns on risk-weighted assets (RWAs) averaging 4.4% over the past four years, Fitch Ratings said in its latest update. It noted that the bank’s profitability was supported by a healthy net interest margin, strong non-interest income, and moderate loan-impairment charges.
In 2023, profitability increased significantly, primarily driven by large FX revaluation gains stemming from Access Bank’s net long foreign-currency position that accompanied the naira devaluation, and will benefit from higher interest rates in 2024.
Access Bank’s FCC ratio increased significantly to 23.9% in Q1-2024 from 14.0% at end-2022, reflecting large foreign-currency translation gains accompanying the naira devaluation and a sharp decline in its risk-weight density.
Nevertheless, Access Bank’s tangible leverage ratio at 6.8% remains significantly below that of other D-SIBs. Fitch expects capitalisation to improve moderately in the near term as a result of a N365 billion rights issue to comply with Access Bank’s impending new paid-in capital requirement of N500 billion. Moody’s Downgrades Uganda’s Ratings, Changes Outlook to Stable
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