Global rating agency, Moody’s has confirmed Access Bank’s long-term local currency deposit rating of B2 as well as its long-term foreign currency deposit rating of B3and the long-term issuer ratings of B2.
The outlook on the bank’s long-term deposit ratings, long-term issuer ratings and senior unsecured rating was changed to stable from ratings under review.
According to a statement by Moody’s sent to BusinessDay, “the confirmation of Access’ long term deposit ratings with a stable outlook reflects Moody’s view that the deterioration in Access’ standalone credit profile, as a result of the merger, is balanced against our assumption of a high likelihood of Access being supported by the government of Nigeria (B2, stable), if needed.”
It also confirmed the bank’s local currency senior unsecured rating of B2 along with the local currency national scale deposit ratings of A1.ng/NG-1 and the foreign currency national scale deposit ratings of A3.ng/NG-2 and national scale senior unsecured rating of A1.ng.
Furthermore, Moody’s affirmed Access bank’s short-term bank deposit ratings, issuer ratings and counterparty risk ratings (CRR) at Not-prime and affirmed the short-term counterparty risk assessment (CRA) at Not-prime(cr).
At the same time, Moody’s has downgraded Access’ baseline credit assessment (BCA) to b3 from b2, its long-term CRRs to B2 from B1, long-term CRA to B2(cr) from B1(cr) and national scale CRRs to Aa3.ng from Aa1.ng.
Diamond Bank PLC’s (Diamond) BCA was upgraded to b3 from caa3 and all Diamond’s ratings have been aligned with the ratings of Access. The outlook on Diamond’s long-term deposit and issuer ratings was changed to stable from ratings under review.
Diamond’s ratings will subsequently be withdrawn.
The statement said “Moody’s actions are driven by the announcement by Access on March 19 that Diamond’s assets, liabilities and undertakings have now been assumed by Access.
“The downgrade of Access’ BCA to b3 from b2 reflects Moody’s view that there will be a weakening of the bank’s credit profile following the merger with Diamond, despite the immediate improvement to Access’ funding structure and long-term profitability. Following the merger, Access’ capital and asset risk metrics will deteriorate given Diamond’s weaker credit profile (though much smaller than Access, Diamond had a BCA of caa3 before the merger was completed).
“Following the BCA downgrade to b3, we now incorporate 1 notch of rating uplift on Access’ BCA to align its local currency deposit ratings of B2 with that of Nigeria’s issuer rating.
“Moody’s upgrade of Diamond’s ratings reflects the fact that the rated deposits and liabilities of Diamond are now assumed by Access, a stronger entity and as a result, Diamond’s ratings have been aligned with Access’ ratings. Confirmation and stable outlook is driven by standalone and support considerations.”
Moody’s said “the primary driver of the confirmation of Access’ long-term deposit ratings with a stable outlook is Moody’s view that the deterioration in Access’ standalone credit profile, as a result of the merger, is balanced against our assumption of a high likelihood of Access being supported by the government of Nigeria (B2, stable) if needed.
“Access’ local currency deposit rating and outlook is in line with the issuer rating and stable outlook of the support provider, the government of Nigeria.”
According to Moody’s “following the merger, Access’ market share increased to 14.8% in deposits from 10.3% (as of September 2018) and, combined with a customer base of 29 million, is now the largest bank in Nigeria. Given the systemic importance of the bank to the economy and Nigeria’s payments system, Moody’s expects that external support from the authorities will be forthcoming if needed.”
Moody’s said “capital and asset quality deterioration offset funding and profitability benefits from the merger.”
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
