GCR Withdraws Credit Ratings for Access Bank (South Africa) Limited

….Due to Insufficient Information”

Access Bank South Africa Faces Persistent Losses Despite Capital Injections, Rating Agency Withdraws Issuer Credit Ratings

GCR Ratings (GCR) has withdrawn its national scale, long-term, and short-term issuer credit ratings for Access Bank (South Africa) Limited, citing insufficient information to meet the agency’s standard information sufficiency requirement. GCR stated that due to the lack of adequate data, it could no longer sustain the issuer credit ratings, thus withdrawing all previously assigned ratings for the bank.

This move follows a difficult financial path for Access Bank (South Africa) Limited, which has been struggling to turn around its fortunes since being acquired by Access Bank Plc in 2021. Despite receiving capital injections of ZAR 1.4 billion (approximately N115 billion) from Access Holdings, the subsidiary has continued to post losses. GCR had previously forecast that Access Bank (South Africa) would likely record another financial loss by the end of 2024, after having reported losses in 2023 as well. According to GCR, the capitalisation of the bank was expected to deteriorate in the short to medium term, urging the bank to either return to shareholders or seek further capital from the market to strengthen its position.

Market Position of Access Bank South Africa

Access Bank South Africa is currently ranked as the 24th largest regulated bank out of 30 in South Africa, holding a market share of less than 0.1% across assets, loans, and deposits. Despite its relatively small presence in the South African banking sector, Access Bank Plc, Nigeria’s largest lender by assets, has been aiming to grow its footprint in the country. In a bid to increase its market share, Access Bank Plc made an offer to acquire Bidvest Bank Holdings Ltd. for approximately 2.8 billion rand ($159 million). This acquisition would allow the Nigerian banking giant to bolster its presence in South Africa’s competitive banking sector.

Despite these efforts, the withdrawal of the credit ratings does not necessarily mean that Access Bank South Africa has failed to meet its debt obligations, nor does it suggest a rapid deterioration of its financial position. Instead, the withdrawal highlights that the bank has not provided crucial information required to properly assess its credit profile. As a result, GCR can no longer support or maintain any of the previously assigned ratings for Access Bank (South Africa) Limited.

Challenges in South Africa’s Banking Market

The ongoing struggles of Access Bank South Africa come as the South African banking sector remains relatively mature. In response to these challenges, Segun Agbaje, the Group CEO of Guaranty Trust Holding Company (GTCO), made it clear that his bank had no immediate plans to expand into South Africa, despite being Nigeria’s largest bank by profit and market capitalisation. Agbaje, during a “Facts Behind the Offer” presentation at the Nigerian Stock Exchange (NGX), expressed that he was not interested in entering a market where growth opportunities were limited.

“South Africa is a mature market, All the South African companies making money are making them from Nigeria. So I am not going to South Africa to look to make money, when they are coming here to make money,” Agbaje stated, emphasizing the differences between the growth opportunities available in emerging economies like Nigeria versus the saturated and mature South African market.

Agbaje’s comments reflect a growing sentiment among Nigerian businesses that South Africa, despite its established economy, may not be the ideal destination for investment, especially when the Nigerian market continues to offer substantial growth prospects. This view is particularly relevant for banks and financial institutions that are looking for high returns on their investments.

Future Outlook for Access Bank South Africa

Looking ahead, the future of Access Bank (South Africa) remains uncertain. The lack of sufficient financial data provided to GCR makes it difficult to assess the bank’s creditworthiness fully. The persistent financial losses and the challenge of capitalisation are major obstacles that Access Bank South Africa will need to address if it aims to secure a more stable position in the South African banking sector.

The larger context of this situation involves the increasing trend of Nigerian banks eyeing South Africa for expansion, despite challenges such as mature competition and market saturation. The question remains whether these banks can overcome the challenges and make a meaningful impact on the South African market or if, like Access Bank South Africa, they will face the reality of difficulties in maintaining profitability in a market already dominated by established players.

In the coming years, Access Bank South Africa’s ability to adapt to market demands, secure additional capital, and improve its operational efficiency will determine whether it can recover and contribute to Access Bank Plc’s broader strategy of international growth. However, with a continued focus on Nigeria and other high-growth markets, Access Bank and other Nigerian lenders will need to balance their expansion strategies with realistic assessments of the markets they are entering.