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

25 Jun 2015 In Rating Notifications

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

Lagos Nigeria, 25 June 2015—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. This rating(s) is valid until 06/2016.

SUMMARY RATING RATIONALE

Global Credit Ratings has accorded the above credit rating(s) to Access Bank Plc based on the following key criteria:

Access Bank Plc’s (“Access” or “the bank”) strong market position in Nigeria’s highly competitive banking industry, having successfully completed an integration process which led to its new status as one of the top five largest banks in Nigeria (in terms of total assets and geographical spread), supports its rating. Access’ systemically important bank status and the implied likelihood of state support (if necessary), was also favourably considered.

Strong internal capital generation capacity boosted shareholders’ funds by 13.5% to N276.7bn at 31 December 2014. However, the bank’s risk weighted capital adequacy ratio (“RWCAR”) reduced by 120bps to 18.4% at year end, on the back of Basel 2 accord implementation. However, the subsequent successful raising of N49.0bn through a Rights Issue in 1QF15 is projected to strengthen the RWCAR to 23% at 30 June 2015. Note was also taken of the USD400m (Eurobond) subordinated notes issued during F14 to support the bank’s funding base.

Access displayed a lower gross non-performing loan (“NPL”) ratio of 2.2% (one of the industry’s lowest) at FYE14, improving from 2.7% in the previous year. While gross impaired loans rose by 11.9% to N25.3bn, the impact of stronger growth in advances, and the restructuring of loans (amounting to N36.3bn), saw the NPL ratio decline. Specific provision coverage of NPLs at FYE14 was 31.6% (FYE13: 35% coverage), while the availability of the regulatory risk reserve provides additional comfort.

Key profitability metrics improved in F14, with profit after tax rising by 14.8% to N43.1bn, on the back of a significant improvement in operating income coupled with constrained operating expense growth, translating into a lower cost ratio of 62.2%. Hence in F14, return on average equity and assets (“ROaE” and “ROaA”) rose to 16.7% and 2.2%, from 15.5% and 2.1% in F13 respectively.

As Access’ status as a systemically important bank has been factored into its current ratings, an upward movement in the ratings and/or outlook would be linked to a sustained and consistent improvement in profitability, asset quality and market share. However, inability to compete with peers or loss of significant market share, such that it loses its current status among the top tier banks, may result in a negative rating action. Also, the rating may be impacted by any significant loss as a result of its growing exposures (particularly the loan book and foreign borrowings).

NATIONAL SCALE RATINGS HISTORY

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

Last rating (September 2014)
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 2015
Nigeria Banking Sector Bulletin (December 2014)
Access rating reports (2004-14)
Glossary of Terms/Ratios (February 2014)


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 2014 (plus three years of comparative numbers), latest internal and/or external reports to management, full year 2015 detailed budgeted financial statements and most recent year-to-date unaudited accounts to 30 March 2015, 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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