S & P Affirms Access Bank’s ‘B/B’ Ratings, Stable Outlook
By CHUKWUMAH KELECHUKWU
The S & P global ratings has affirmed Access Bank’s ‘B and B’ global scale on Access Bank, with stable outlook, saying that the lender will maintain a stable credit profile over the next 12 months.
The rating agency in its latest report released on Thursday also said that following the acquisition of Diamond Bank, Nigeria’s Access Bank has upped its market share to 25 per cent and that cost of funding would likely decline.
“S&P Global Ratings affirmed its ‘B/B’ issuer credit ratings on Nigeria-based Access Bank Plc. The outlook remains stable. We also affirmed our ‘ngA/ngA-1′ Nigeria national scale ratings on the bank.
“The stable outlook points to our expectation that Access Bank will maintain a broadly stable credit profile over the next 12 months.
“We note however that Access Bank’s asset quality indicators diluted and the operational integration of Diamond Bank is unfinished,” the S&P’s stated in its report.
According to the agency, the affirmation balances the benefits of the Diamond acquisition for Access’ franchise and prospective cost of funding with the bank’s diluted asset quality indicators and integration risks. It further noted that the Diamond acquisition would cement Access’ leading franchise in the competitive Nigerian banking sector. The combined entity according to S&P has total assets of about N6.4 trillion (approximately USD17 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. “At the same time, we see 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,” it stated.
S & P also stated that cost of risk will increase to 1.4 per cent-1.5 per cent in 2019, since Access will have to take additional provisions, stressing that the bank will write off about NGN120 billion in 2019 and around 0.5per cent-1.0 per cent of average customer loans between 2020 and 2021.
It however, anticipates that 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.
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