EMEKA OKOROANYANWU
Standard and Poor’s (S&P) Global Ratings has affirmed its ‘B/B’ issuer credit ratings on Access Bank Plc, saying also that the bank’s outlook remains stable. S&P also affirmed its ‘ngA/ngA-1’ Nigeria national scale ratings on Access Bank.
The ratings mean that Access Bank is in a stable condition and set to handle big ticket transactions in the future.
Access Bank has increased its market share to about 25 per cent since the acquisition of Diamond Bank in March, and its cost of funding is expected to decline also.
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The stable outlook by S&P points to expectation that Access Bank will maintain a broadly stable credit profile and a higher earning capacity over the next 12 months, indicating also that the bank’s acquisition of Diamond Bank was in the right direction and best interest of shareholders.
“We believe the Diamond acquisition will cement Access’ leading franchise in the competitive Nigerian banking sector. The combined entity has total assets of about N6.4 trillion (about $17 billion), representing nearly one-quarter of the system’s total assets. We believe Access’ expanded customer and loans base will underpin stronger revenue generation and stability going forward,” said S&P.
However, analysts are predicting “slight pressure” on the consolidated bank’s asset quality indicators, because the bulk of Diamond’s nonperforming loans (NPLs) were transferred to Access when the merger became effective on March 19, 2019.
Cost of risk is expected to increase between 1.4 per cent and 1.5 per cent at the end of the year since Access will have to take additional provisions. Access Bank would have to write off about N120 billion this year and around 0.5 per cent to -1.0 per cent of average customer loans between 2020 and 2021. However, Access’ cost of risk will remain below the sector average, based on estimate of the sector’s credit losses of 2.8 per cent in 2019 and 2.5 per cent in 2020, analysts have predicted.
“We project Access’ risk-adjusted capital (RAC) ratio will hover around 3 per cent to 4 per cent through 2021. Although we consider this RAC level to be weak, we expect the Diamond deal to strengthen Access’ earnings capacity, with core earnings climbing to about 2.5 per cent of managed assets through 2021.
“We forecast the net interest margin will increase toward 7% per cent throughout the 2019-2021, while fees and commissions will rise by N30 billion,” says an analyst based in Lagos