“Access Bank Controls 17% of Nigerian Banking Assets in 2023, Fitch Ratings Report Reveals”

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Access Bank accounted for 17% of Nigerian banking assets in 2023, according to the latest ratings note by Fitch. In its recent credit rating update, Fitch Ratings affirmed Access Bank Plc’s Long-Term Issuer Default Rating (IDR) at ‘B-‘ with a positive outlook.

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Additionally, the bank’s National Long-Term Rating was affirmed at ‘A+(nga)’ with a stable outlook, driven by its standalone creditworthiness as expressed by its viability rating (VR).

Fitch noted that Access Bank’s credit ratings reflect its high sovereign exposure relative to capital and the concentration of its operations within Nigeria.

The National Long-Term Rating balances the bank’s leading franchise against its weaker core capitalization and profitability compared to higher-rated peers.

As Nigeria’s largest banking group, Access Bank has expanded its footprint by acquiring several small banks across Sub-Saharan Africa, aligning with its African expansion strategy.

Fitch anticipates that these acquisitions will continue, further strengthening Access Bank’s franchise and geographical diversification. However, the numerous cross-border acquisitions pose execution risks and may pressure financial metrics.

The bank’s single-obligor credit concentration was moderate, with the 20 largest loans representing 124% of Fitch Core Capital (FCC) at the end of Q1 2024. Access Bank’s exposure to the oil and gas sector was 18% of gross loans in 2023, lower than other domestic systemically important banks (D-SIBs). Its exposure to Nigerian sovereign securities and Central Bank of Nigeria cash reserves remains very high.

In terms of asset quality, Access Bank’s impaired loans ratio (Stage 3 loans under IFRS 9) decreased to 3.1% in 2023 from 3.4% in 2022. Stage 2 loans also declined to 7.5% of gross loans from 8.3% in 2022. The specific loan loss allowance coverage of impaired loans was 31%, which Fitch considers low due to a reliance on collateral. Fitch predicts a moderate increase in the impaired loan ratio in the near term.

Access Bank has demonstrated sound profitability, with operating returns on risk-weighted assets averaging 4.4% over the past four years. The bank’s profitability in 2023 saw a significant boost from large FX revaluation gains due to its net long foreign-currency position amid the naira devaluation, and is expected to benefit from higher interest rates in 2024.

The bank’s FCC ratio increased significantly to 23.9% in Q1 2024 from 14.0% at the end of 2022, driven by large foreign-currency translation gains and a decline in its risk-weight density.

Despite this, Access Bank’s tangible leverage ratio at 6.8% remains significantly below that of other D-SIBs. Fitch expects moderate improvement in capitalization in the near term due to a N365 billion rights issue aimed at complying with Access Bank’s new paid-in capital requirement of N500 billion.

Godwin Okafor, The Naija247news
Godwin Okafor, The Naija247newshttps://naija247news.com
Godwin Okafor is a veteran Financial Journalist, Internet Social Entrepreneur, and the visionary Founder of Naija247news Media Limited. With an extensive career spanning over 16 years in financial journalism, Godwin possesses a wealth of experience that seamlessly bridges both traditional and digital media landscapes. His journey in journalism commenced at Business Day, Nigeria, where he laid the foundation for his prolific career. In 2010, Godwin took a bold step by founding Naija247news Media, a platform that has since become a prominent player in delivering timely and accurate news. Educationally, Godwin Okafor holds a Bachelor's degree in Industrial Relations and Personnel Management from the prestigious Lagos State University, Ojo, Lagos. His commitment to continuous learning led him to the Lagos Business School, where he further honed his skills. Additionally, he is recognized as a Fellow of the University of Pennsylvania, having successfully completed the Wharton Seminar for Business Journalists. Throughout his illustrious career, Godwin has earned acclaim by winning numerous journalism awards, a testament to his dedication to excellence in reporting. Beyond his role as a Financial Journalist, Godwin Okafor wears the hat of the Chairman at Emmerich Resources Limited, the publishing entity behind Naija247news. His visionary leadership has played a pivotal role in shaping the media landscape and establishing Naija247news as a trusted source of information. Godwin Okafor's multifaceted expertise, commitment to journalistic integrity, and leadership in the realm of business journalism underscore his influential presence in both the media and entrepreneurial spheres.

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