Access Bank Share of Nigerian Banking Assets Falls to 16%
Growing strongly by acquisition, Access Bank, Nigeria’s largest lender, accounted for 16% of banking system assets at the end of the financial year 2022, Fitch Ratings said in its latest port on Tier-banks.
Last year, the bank was reported to oversee 19% of the banking asset in the economy. >>Access Bank Controls 19% of Nigerian Banking Assets
In its rating note, Fitch Affirms Access Bank at ‘B-‘ with the outlook accorded as stable. Fitch noted that Access Bank has acquired several small banks in other Sub-Saharan African countries in recent years, in line with its African expansion strategy.
Fitch thinks the bank’s acquisitions strategy will continue, strengthening Access Bank’s franchise and geographical diversification. It said Access Bank has a record of integrating domestic acquisitions but the large number of cross-border acquisitions creates execution risks and may pressure capital.
In the industry, Access Bank, like most of its peers and immediate rivals is exposed to the Nigerian government. According to Fitch Ratings, the financial services company’s single-obligor credit concentration is high. Access Bank’s 20 largest loans represent 193% of Fitch Core Capital at the end of 2022.
Oil and gas exposure was 23% of the bank’s gross loans at the end of 2022, the level analysts considered as material but lower than at other domestic systemically important banks.
The rating noted that Nigeria’s sovereign exposure through securities and CBN cash reserves is very high relative to FCC, at over 600% in 2022. Its balance sheet position remains solid following as loan quality improved amidst write-offs, and loan restructuring.
Access Bank’s impaired loans -Stage 3 loans under IFRS 9- ratio declined to 3.4% in 2022 from 6.0% in 2019, largely reflecting problem loans inherited through the Diamond Bank Plc acquisition in 2019 being addressed through write-offs and restructurings.
The rating note indicated that Stage 2 loans similarly declined to 8.3% of gross loans in the same period from 30.7% in 2019.
Specific loan loss allowance coverage of impaired loans which printed at 30% in 2022 is considered low. Fitch forecasts the impaired loan ratio to increase moderately in the near term.
Access Bank delivers sound profitability, as indicated by operating returns on risk-weighted assets averaging 3.1% over the past four years. The bank’s strong profitability is supported by a sound net interest margin (NIM), strong non-interest income, and moderate loan-impairment charges.
Fitch noted that profitability declined in 2022 due to a weaker net interest margin driven by higher funding costs, and losses stemming from Ghana’s domestic debt exchange programme.
Access Bank’s FCC ratio which settled at 14.0% in 2022 is considered lower than that of other Nigerian rivals. Fitch however said pre-impairment operating profit is substantial, providing a large buffer to absorb LICs without affecting capital.
Access Bank’s total capital adequacy ratio (CAR) and Tier 1 Capital ratio have large buffers above impending Basel III requirements but the CET1 capital ratio is close to the requirement.
The Bank has a material reliance on term-deposit funding at 37% of customer deposits in 2022, resulting in a higher cost of funding than major banks. Naira Steadies as Banks Issue Update on FX Purchase
Depositor concentration is moderate, with the 20 largest depositors representing 15% of customer deposits at end-2022. Liquidity coverage in local and foreign currencies is comfortable. #Access Bank Share of Nigerian Banking Assets Falls to 16%
