Fitch Revises Outlook on Access Bank to Stable from Negative; Affirms at ''B''

Proshare

Monday, July 05, 2021 / 06:10 PM / By Fitch Ratings / Header Image Credit: Premium Times Nigeria


Proshare Nigeria Pvt. Ltd.


Fitch Ratings has revised the Outlook on Nigeria-based Access Bank Plc's Long-Term Issuer Default Rating (IDR) to Stable from Negative, and affirmed the rating at 'B'. The Viability Rating (VR) has been affirmed at 'b'.

 

The Outlook revision reflects Fitch's view that risks to Access's credit profile have receded since the onset of the Covid-19 crisis, as reflected in the bank's resilient financial metrics in 2020 and 1Q21 and our expectation that these trends will continue. Our action also reflects our view that the bank has sufficient headroom at the current rating level to absorb risks to its asset quality, profitability and capital under our base case, resulting from operating environment pressures.

 

Key Rating Drivers

IDRS, VR, and Senior Debt Ratings

 

Access's IDRs and senior debt ratings are driven by its intrinsic creditworthiness, as defined by its 'b' VR. The VR takes into consideration business concentration and sensitivity to Nigeria's volatile operating environment, mitigated by sound profitability and adequate capitalisation for its risk profile and ensuing reasonable loss-absorption capacity.

 

The bank's asset quality has continued to hold up, supported by substantial non-loan assets - largely comprising cash balances at the Central Bank of Nigeria (CBN) (mainly restricted deposits) and government securities - regulatory forbearance on loans, and proactive management of legacy assets at Diamond Bank (acquired 2019).

 

Access's impaired (IFRS 9 Stage 3) loans ratio (end-1Q21: 4.4%) compares well with peers, while total reserve coverage is healthy (87%). Impaired loans have fallen due to loan repayments, restructurings, loan conversion to naira from US dollars, and write-offs.

 

Nevertheless, Stage 2 loans - concentrated in the oil sector - remain high, although they have fallen (end-1Q21: 12.6% of loans; end-1H20: 22%), reflecting the improving economic outlook. We believe migration risk relating to Stage 2 loans should be limited, given the restructuring of a significant proportion of the loans. Total oil-related exposure remains significant (28% of loans), though in line with the sector, and foreign-currency loan exposure since end-2019 has more than halved to 16% at end-1Q21.

 

Access's operating profit to risk-weighted assets (RWA) is sound (end-1Q21: 6.1%, up from 3.3 % at end-2020), and has been supported by lower funding costs (reflecting expanding CASA deposits in 2020), increased scale following the Diamond acquisition, and higher oil prices. Non-interest revenue should continue to grow, driven by customer-driven trading income and fee income as economic activity picks up.

 

Nevertheless, profitability underperforms the highest-rated peers in Nigeria, due in part to integration costs from Diamond Bank. We expect loan-impairment charges to remain high in 2021, although lower than in 2020 when Access reported a one-off charge at its UK subsidiary.

 

Access's capitalisation is adequate, as reflected in a Fitch Core Capital (FCC) ratio of 17.7% at end-1Q21, albeit below more highly rated peers. Buffers over regulatory minimums are solid (total capital ratio of 22.2% versus the 15% regulatory minimum). However, Access's tangible leverage ratio (end-1Q21: 8.0%) is below the highest-rated peers, although we expect it to improve as the profitability outlook recovers.

 

Capitalisation is sensitive to RWA inflation from likely naira depreciation and concentration risk (end-1Q21: the top 20 loans accounted for 1.73x FCC; 70% in Stage 1), although RWA inflation risks should be mitigated by lower foreign-currency exposure than peers and rising internal capital generation.

 

Access's funding profile has continued to benefit from its expanded retail franchise following the Diamond Bank acquisition. CASA deposits rose to 63% of the deposit base by end-1Q21 (end-2019: 58%), driving down funding costs. Fitch believes there is scope to increase the share of CASA further to a level more in line with peers, while funding costs could also fall further as outstanding Eurobonds are refinanced at lower rates.

 

The bank has good overall balance sheet liquidity but takes foreign currency liquidity risk (and counterparty risk) through substantial currency swaps with the CBN. We consider foreign-currency liquidity to be only adequate, notwithstanding potential liquidity available from the broader Access Bank group, in light of the tight FCY conditions in Nigeria. Naira liquidity is supported by large cash placements (excluding restricted deposits at the CBN) and government securities.


Proshare Nigeria Pvt. Ltd.


National Ratings

Access's National Ratings reflect its creditworthiness relative to other issuers in Nigeria. They are lower than the highest-rated Nigerian peers due to Access's weaker profitability and capitalisation metrics. Access's National Short-Term Rating of 'F1(nga)' is the lower of the two possible options for the bank's 'A+(nga)' National Long-Term Rating under Fitch's criteria, reflecting potential risks to funding and liquidity from market instability.

 

Access's naira-denominated subordinated debt rating is 'A-(nga)', in line with the two-notch base-case notching in our criteria.

 

Rating Sensitivities

Factors that could, individually or collectively, lead to positive rating action/upgrade:

 

Upside to Access's ratings is unlikely without a material improvement in the operating environment and a sovereign upgrade, accompanied by further improvement in the bank's underlying asset quality and a strengthening of its capitalisation to a level more in line with large bank peers.

 

Factors that could, individually or collectively, lead to negative rating action/downgrade:

 

A material worsening in the operating environment that leads to greater-than-expected pressure on the bank's financial metrics, could lead to a downgrade.

 

The ratings could also be downgraded if Access's FCC ratio remains below 15% for a sustained period, asset quality weakens significantly - to the extent that its impaired-loan ratio rises above 10% - or there is a severe tightening in the bank's foreign-currency liquidity.

 

Best/Worst Case Rating Scenario

International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance.

 

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity.

 

Proshare Nigeria Pvt. Ltd.

 

Proshare Nigeria Pvt. Ltd.


Related News - Rating Agencies on Nigeria

  1. Moody's Announces Completion of a Periodic Review of Ratings of Nigeria
  2. Fitch Affirms Nigeria at ''B''; Outlook Stable
  3. Fitch Revises Nigeria's Outlook to Stable, Affirms at 'B'
  4. S and P Global Ratings Affirmed Nigeria's Long-Term Rating At 'B-'; Outlook Stable
  5. Moody's Announces Completion of a Periodic Review of Ratings of Nigeria
  6. Nigeria's Oil Output Cap to Weigh on Growth, External Finances
  7. Moody's Affirms Nigeria's B2 Ratings, Maintains Negative Outlook
  8. Fitch Downgrades Nigeria to 'B'; Outlook Negative
  9. Nigeria Long-Term Rating Lowered To ''B-'' On Weakening External Position
  10. Nigeria's Outlook Revised To Negative On Falling Foreign Exchange Reserves
  11. Moody's Announces Completion of a Periodic Review of Ratings of Nigeria
  12. Fitch Revises Outlook on Nigeria to Negative; Affirms at 'B plus'
  13. Moody's Changes Nigeria's Sovereign Ratings Outlook to Negative From Stable; Affirms The B2 Ratings
  14. Fitch Affirms Nigeria at 'B plus'; Outlook Stable


Proshare Nigeria Pvt. Ltd. 


Related News - Rating Agencies on Banks

  1. GCR Upgrades Stanbic IBTC Bank Plc's SNP2 N30bn Series 1 Senior Unsecured Notes; Stable Outlook
  2. Moody's Announces Completion of a Periodic Review of Ratings of Zenith Bank Plc
  3. Moody's Announces Completion of a Periodic Review of Ratings of Union Bank of Nigeria Plc
  4. Moody's Announces Completion of a Periodic Review of Ratings of Access Bank Plc
  5. Moody's Announces Completion of a Periodic Review of Ratings of UBA Plc
  6. Moody's Announces Completion of a Periodic Review of Ratings of Sterling Bank Plc
  7. Moody's Announces Completion of a Periodic Review of Ratings of Guaranty Trust Bank Plc
  8. Moody's Announces Completion of a Periodic Review of Ratings of FCMB Limited
  9. Moody's Announces Completion of a Periodic Review of Ratings of Fidelity Bank Plc
  10. Moody's Announces Completion of a Periodic Review of Ratings of First Bank of Nigeria Limited
  11. GCR Affirms Wema Bank Plc's Issuer National Scale Long Term Rating; Outlook Evolving
  12. GCR Upgrades Stanbic IBTC Bank Plc's National Scale Long-term Issuer Rating; Outlook Stable
  13. GCR Affirms Wema Bank Plc's Issuer National Scale Long Term Rating; Outlook Evolving
  14. Moody's Announces Completion of a Periodic Review of Ratings of Bank of Industry
  15. Fitch Affirms Wema Bank at 'B-'; Removes Rating Watch Negative; Outlook Stable
  16. Nigerian Banks' Near-Term Credit Risks Ease
  17. CBN-Directed Board Changes At First Bank and FBNH Addresses Governance Issues - S and P
  18. Fitch Affirms FBN Holdings' Ratings at 'B-', Negative After Board Removal by Central Bank
  19. Fitch Affirms Ecobank Transnational Inc at ''B-''; Outlook Stable
  20. Moody's Places First Bank's Ratings on Review for Downgrade Following Central Bank Actions
  21. Fitch Revises UBA Senegal's Outlook to Stable; Affirms at 'B-'
  22. Fitch Affirms Union Bank of Nigeria Plc at 'B-'; off RWN; Outlook Negative
  23. Fitch Affirms First City Monument Bank at 'B-' Stable; off Rating Watch Negative
  24. Fitch Affirms Sterling Bank at 'B-' Stable; off Rating Watch Negative
  25. Fitch Maintains Wema Bank''s Long-Term IDR of ''B-'' on Rating Watch Negative
  26. Fitch Revises Bank of Industry's Outlook to Stable; Affirms IDR at 'B'
  27. Fitch Affirms Fidelity Bank at 'B-'; off Rating Watch Negative; Outlook Stable
  28. Fitch Affirms Access Bank at 'B'; off RWN; Outlook Negative
  29. Fitch Affirms UBA at 'B'; off RWN; Outlook Stable
  30. Fitch Affirms Zenith Bank at 'B'; Off Rating Watch Negative, Outlook Stable
  31. Fitch Affirms Guaranty Trust Bank at 'B'; off RWN; Outlook Stable
  32. Fitch Affirms FBN Holdings Plc at ''B-''; off RWN; Outlook Negative
  33. S and P Global Ratings Affirmed First Bank of Nigeria Ltd Ratings, Outlook Stable
  34. Fitch Affirms Coronation Merchant Bank's Rating at B-
  35. Fitch Rates Coronation Merchant Bank Limited at ''B-''; Outlook Negative
  36. Moody's Announces Completion of a Periodic Review of Ratings of Union Bank of Nigeria Plc
  37. Moody's Announces Completion of a Periodic Review of Ratings of Sterling Bank Plc
  38. Moody's Announces Completion of a Periodic Review of Ratings of Access Bank Plc
  39. Moody's Announces Completion of a Periodic Review of Ratings of Fidelity Bank Plc
  40. Moody's Announces Completion of a Periodic Review of Ratings of FCMB Limited
  41. Moody's Announces Completion of a Periodic Review of Ratings of First Bank of Nigeria
  42. Moody's Announces Completion of a Periodic Review of Ratings of Zenith Bank Plc
  43. Moody's Announces Completion of a Periodic Review of Ratings of Guaranty Trust Bank Plc
  44. Moody's Announces Completion of a Periodic Review of Ratings of UBA Plc
  45. Moody's Announces Completion of a Periodic Review of Ratings of Bank of Industry
  46. Moody's Announces Completion of a Periodic Review of Ratings of Bank of Industry
  47. Coronavirus Shock Likely to Reduce Some Banks' Capital, Increase Credit Vulnerabilities
  48. Fitch Maintains Access Bank's 'Aplus (nga)' National Long-Term Rating on RWN
  49. Fitch Revises 2 Nigerian Banks' National Ratings
  50. Banking System Outlook Update - Nigeria Outlook Changes to Negative Due to Oil Price Collapse
  51. Various Rating Actions On Nigerian Banks By S and P Following Sovereign Downgrade; Outlooks Stable
  52. Nigerian Banks at Severe Risk from Oil Price Slump, Coronavirus
  53. Fitch Downgrades 3 Nigerian Banks to 'B', Places All 10 Banks on Negative Watch
  54. Outlooks On Six Nigerian Banks Revised To Negative After Same Action On Sovereign
  55. Fitch Revises Outlook on UBA Subsidiaries to Negative on Parent Action
  56. Fitch Revises Outlook on 4 Nigerian Banks to Negative on Sovereign Action
  57. Moody's Affirms Bank of Industry Ratings, Changes Outlook to Negative from Stable
  58. Moody's Affirms Ratings of Nigerian Banks Following Action On The Nigerian Government
  59. Fitch Affirms Union Bank of Nigeria Plc at 'B-'; Outlook Stable
  60. Fitch Affirms Stanbic IBTC Bank at 'AAA(nga)'
  61. Fitch Affirms Zenith Bank Plc at 'B' plus; Outlook Stable
  62. Fitch Affirms Bank of Industry at 'B' plus; Outlook Stable
  63. Fitch Affirms United Bank for Africa PLC at 'B' plus; Outlook Stable
  64. Fitch Affirms Access Bank at 'B'; Stable Outlook
  65. Fitch Affirms Guaranty Trust Bank at 'B' plus; Stable Outlook
  66. Fitch Revises Outlook on FBNH to Stable; Affirms at 'B-'
  67. S and P Global Ratings Affirmed ETI And Ecobank Nigeria Ltd Ratings; Outlook Stable
  68. Fitch Rates Access Bank's Tier 2 Subordinated Debt Final 'A(nga)'
  69. Fitch Affirms Ecobank Transnational Inc at 'B'; Outlook Stable
  70. Access Bank 'B and B' Ratings Affirmed; Outlook Stable


Proshare Nigeria Pvt. Ltd. 


Related News - Rating Agencies on Selected Companies and Notes

  1. Moody's Announces Completion of a Periodic Review of Ratings of Interswitch Limited
  2. GCR Assigns an Indicative Rating of BBB (NG)(IR) with a Positive Outlook to Fidson Healthcare Plc
  3. Moody's Downgrades Interswitch's Ratings to B3 from B2; Stable Outlook
  4. GCR Ratings Upgrades Guinness Nigeria Plc's Rating; Stable Outlook
  5. GCR Ratings Places CardinalStone Partners Limited's Credit Ratings on Review Extension
  6. GCR Affirms Custodian Life Assurance Limited's Rating; Outlook Stable
  7. Moody's Completes Periodic Review of Ratings of SEPLAT Following April 28, 2021 Discussion
  8. Fitch Rates Seplat's New Notes Final 'B-'
  9. GCR Issues Highest AAAplus (NG) and A1plus (NG) Ratings to Dangote Cement
  10. Moody's Assigns Ratings to Dangote Cement Plc's DMTN Program and Proposed Series 1 Notes
  11. Fitch Revises IHS's Outlook to Stable; Affirms at 'B'
  12. Moody's Announces Completion of a Periodic Review of Ratings of Dangote Cement Plc
  13. Moody's Announces Completion of a Periodic Review of Ratings of Interswitch Limited
  14. Moody's Announces Completion of a Periodic Review of Ratings of Interswitch Limited
  15. Moody's Announces Completion of a Periodic Review of Ratings of SEPLAT
  16. Moody's Assigns Ratings to Dangote Cement Plc's DMTN Program and Proposed Series 1 Notes
  17. Rating Actions Taken On Several Corporate Issuers With Exposure To Nigeria
  18. Fitch Affirms Bharti Airtel at ''BBB-''; Off Watch Negative; Outlook Stable
  19. Fitch Revises IHS's Outlook to Negative; Affirms at 'B plus'
  20. Moody's Affirms Interswitch's Ratings; Outlook Remains Stable
  21. Moody Changes Ratings for IHS, Seplat and DANGCEM Following Negative Rating on Sovereign Outlook
  22. Moody's Assigns B2 Corporate Family Rating To Interswitch Limited; Outlook Stable


Proshare Nigeria Pvt. Ltd.


Related News - Rating Agencies on Kaduna State

  1. Fitch Revises Kaduna's Outlook to Stable on Sovereign Action; Affirms at ''B''
  2. Fitch Revises Outlook on Kaduna State to Negative on Sovereign Rating Action; Affirms at 'B'
  3. Fitch Affirms Nigeria's Kaduna State at ''B''; Outlook Stable - Oct 11, 2019
  4. Fitch Affirms Nigeria's Kaduna State at 'B'; Outlook Stable - May 04, 2018

Related News - Rating Agencies on Lagos State

  1. Fitch Revises Lagos's Outlook to Stable on Sovereign Action; Affirms at 'B'
  2. Fitch Downgrades Lagos State to 'B' on Sovereign Rating Action; Outlook Negative
  3. Fitch Affirms Nigeria's Lagos State at 'B plus'; Outlook Stable
  4. Global Credit Rating (GCR) Downgrades Lagos State’s Environmental Municipality Note
  5. Fitch Affirms Lagos State at 'B' Plus; Outlook Stable
  6. Fitch Affirms Nigeria's Lagos State at ''B ''; Outlook Negative

 


READ MORE:
Related News
SCROLL TO TOP