To further strengthen its funding base, Access Bank has successfully issued a Tier II N30 billion Fixed Rate Subordinated Unsecured Bond. The bond was oversubscribed by N13.6 billion, according to the bank in a statement sent to BusinessDay. The oversubscription further buttresses the confidence investors repose in the bank, it said.
Banks are required to maintain a minimum regulatory capital adequacy ratio (CAR) of 10%/15%1 (10 percent for banks with national licence and 15 percent +1 for banks that operate internationally) on an ongoing basis. The Central Bank of Nigeria (CBN) will take into account the relevant risk factors and the internal capital adequacy assessments of each bank to ensure that the capital held by a bank is commensurate with the bank’s overall risk profile.
Ayodeji Ebo, managing director, Afrinvest Securities Limited, believes in the success of the bond, saying there are not many banks in the country issuing local bonds.
He sees the move by Access Bank as an effort to shore up its capital after it spent huge amount of money to acquire Diamond Bank. The acquisition deal, which started in December 2018, gulped over N72.5 billion ($200 million).
The bond, which has a maturity of seven years and is callable after five years, has Chapel Hill Denham Advisory Limited as the mandated Lead Issuing House and Coronation Merchant Bank Limited and First-Ally Capital Limited as the mandated Joint Issuing Houses.
Ayodele Akinwunmi, head, research, FSDH Merchant Bank Limited, said most Nigerian banks have room to grow the Tier II capital to the regulatory requirement in order to enable them create more risk assets to earn more income and improve their return on equity.
“We are a bank with a rigorous and disciplined capital plan and the action taken today is in line with our five-year strategic plan. This is to ensure a strong capital buffer at all times and support our low risk appetite,” Herbert Wigwe, group managing director/CEO, said on the bond issuance.
“Following the merger, we identified some synergies and combined with this issue, we are confident of our capacity to attain the next level of being a more efficient bank,” Wigwe said.
Currently, Access Bank is the number one bank in Africa by customer base with integrated global franchise, strategically developing its presence in key African markets and enhancing collaboration in global financial gateways including London, New York, Asia and the Middle East.
The bank is also consolidating its trade hubs in India, Dubai and China, positioning to be Africa’s Gateway to the World.
Uche Uwaleke, chairman, Chartered Institute of Bankers of Nigeria (CIBN), Abuja chapter, said, the Access Bank local bond issuance was a piece of good news.
“Its success will embolden many more corporates to approach the bonds market,” Uwaleke said.
Concerning the bank’s bond subscription, he said the market conditions seem favourable with a lot of investor interest now in the fixed income space.
“Secondly, the government’s debt strategy of gradually rebalancing the debt stock in favour of external loans will help to crowd in the private sector into the local debt market. The move could be in readiness for the new wave of recapitalisation that is about to sweep through the banking sector,” Uwaleke said.
“It could also be motivated by the need to inject new capital into the bank to be able to meet the challenges thrown up by its recent merger with (or is it acquisition of) the defunct Diamond Bank,” he said.
Earlier this year, Access Bank plc issued a five-year fixed rate senior unsecured green bond valued at N15 billion, the first Certified Climate Bond from an African corporate. The issue, which was awarded an Aa- rating by Agusto & Co and certified by the Climate Bonds Initiative, has a coupon rate of 15.5 percent and is expected to mature in March 2024.
Similarly, the tier-one lender in October 2016 raised $300 million through a Eurobond from the international bond market. The five-year tenor debt instrument with a coupon rate of 10.5 percent is expected to mature in October 2021.
Fitch Ratings, a global rating agency, in its recent report affirmed the lender’s Long-Term Issuer Default Rating (IDR) at ‘B’, while S&P Global Ratings also affirmed its ‘B/B’ issuer credit ratings in June 2019.
HOPE MOSES-ASHIKE & OLUWASEGUN OLAKOYENIKAN
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