GCR Affirms Access Bank Plc’s Rating Of A+(NG); Outlook Stable.

01 Aug 2016 In Rating Notifications

GCR Affirms Access Bank Plc’s Rating Of A+(NG); Outlook Stable.

Lagos Nigeria, 31 July 2016—Global Credit Ratings has affirmed the national scale ratings assigned to Access Bank Plc of A+(NG) and A1(NG) in the long term and short term respectively; with the outlook accorded as Stable. These ratings are valid until June 2017.

SUMMARY RATING RATIONALE

Global Credit Ratings has accorded the above credit ratings to Access Bank Plc based on the following key criteria:

Access Bank Plc (“Access” or “the bank”) ranks among the top-tier banks in Nigeria, with an improved market share of 9.2% in terms of total assets at FYE15 (FYE14: 7.7%).

Shareholders’ funds grew by 32.6% to N367.3bn at 31 December 2015, bolstered by strong internal capital generation, and a Tier 1 capital injection through a successful Rights Issue during F15. The total amount of capital raised (net of costs) amounted to N40.0bn. After the equity raising, the total risk weighted capital adequacy ratio (“CAR”) increased to 19.5% from 18.2% at FYE14.

Although the bank’s liquidity position improved as a result of the capital injection and improved earnings during the period, a significant liquidity gap of N880.5bn amounting to 2.4 times capital is noted in the ‘less than three months’ bucket, based on asset and liabilities contractual maturity matching. It is furthermore noted that liquidity mismatch is a structural issue in the Nigerian banking sector. On a behavioural basis, most deposits are expected to be rolled over at maturity. The bank’s regulatory liquidity ratio averaged 37.3% in F15, against 30% regulatory minimum.

Following a decline in the gross non-performing loan (“NPL”) ratio to 2.2% at FYE14, the NPL ratio declined further to 1.7% at FYE15 given management’s continuous exposure monitoring. Hence, the bank’s NPL ratio ranked as one of the lowest among peers. Total restructured loans stood at an improved N27.5bn at FYE15 (FYE14: N48.5bn), or 1.9% of gross loans. Specific provision coverage of the impaired loans also improved to 43.0% at FYE15 (FYE14: 31.6%).

Profitability remained strong during F15, reflecting an improved N75.0bn in pre-tax profit (representing a 44.2% increase over that of F14), largely supported by a significant increase in non-interest income (which grew 89.6%). As operating expenses grew largely in line with income (at 39.2%) in F15, the cost ratio remained flat at 62.0%. As a result, return on average equity and assets (“ROaE” and “ROaA”) rose to 20.7% and 2.8% in F15, from 16.7% and 2.2% in F14 respectively.

Performance in 1Q F16 reflects an improved position against that of same period in F15 and in line with management projections, despite continued challenging operating conditions.

While the bank’s current rating reflects its position among the top-tier banks, an upward movement in the ratings would arise from a significant and sustained improvement in profitability, asset quality and market share. However, downward pressure on the ratings may arise from a significant loss in market share and/or profitability, or a decline in liquidity below the required regulatory minimum.

NATIONAL SCALE RATINGS HISTORY

Initial rating (August 2004)
Long term: A-(NG); Short term: A2(NG)
Outlook: Stable

Last rating (June 2015)
Long term: A+(NG); Short term: A1(NG)
Outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst
Funmilayo Ojatunwase
.(JavaScript must be enabled to view this email address)
+234 1 462 2545


Committee Chairperson
Dave King
.(JavaScript must be enabled to view this email address)


APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Criteria for Rating Banks and Other Financial Institutions, updated March 2016
Nigeria Banking Sector Bulletin (June 2016)
Access rating reports (2004-15)
Glossary of Terms/Ratios (February 2016)

RATING LIMITATIONS AND DISCLAIMERS

ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATINGS-SCALES-DEFINITIONS. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT www.globalratings.com.ng


SALIENT FEATURES OF ACCORDED RATINGS

GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and (d) the validity of the rating is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.

The ratings were solicited by, or on behalf of, Access Bank Plc, and therefore, GCR has been compensated for the provision of the ratings.

Access Bank Plc participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The credit ratings above were disclosed to Access Bank Plc with no contestation of/changes to the ratings.

The information received from Access Bank Plc and other reliable third parties to accord the credit rating included the audited annual financial statements as at 31 December 2015 (plus four years of comparative numbers), latest internal and/or external reports to management, full year 2016 detailed budgeted financial statements and most recent year-to-date unaudited accounts to 31 March 2016, reserving methodologies and capital management policies. In addition, information specific to the rated entity and/or industry was also received.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE UNDERSTANDING RATINGS SECTION OF THIS SITE.

ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE UNDERSTANDING RATINGS SECTION OF THIS SITE.

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