GCR Ratings has assigned national scale long- and short-term issuer ratings of AA(NG) and A1+(NG) respectively, to Access Bank Plc, with the outlook accorded as stable. According to GCR, the bank’s ratings reflect its position as the largest bank in Nigeria by assets, as well as its growing presence across key markets in Africa and beyond.

Access’ well-established ability to acquire funding via local and international financiers and good asset quality also underpin the ratings, according to the rating note. “Being the largest subsidiary of Access Holdings Plc– a financial holding company listed on the Nigerian Exchange Limited – the bank’s ratings are derived from the strengths and weaknesses of the consolidated Holdco”.

GCR stated that the credit considerations, as well as the ensuing analytical perspectives, are based on Holdco’s consolidated position. However, the ratings have been assigned to the bank. Access accounts for over one-fifth of Nigeria’s banking sector assets as of September 2024 and is present in 20 other countries across Africa, Europe, and Asia, the rating note said.

Analysts noted that the bank’s international footprints are strategically positioned at key global trade hubs, thus, making Access a key enabler of cross-border trades and payments targeted at Africa. GCR expressed the view that its diversification also provides a natural hedge against the bank’s exposure to Nigeria’s relatively volatile operating environment.

Besides the benefits of size and diversification, Access’ strong competitive position is supported by its well-entrenched ESG principles-based business, whilst noting 15.8% of oil and gas loan exposures. The ratings are also driven by the bank’s good funding and liquidity position. Access maintained a foreign exchange (FX) liquidity cover of at least 30% from 2020 to 2024 despite significant sector-wide shortages over the same period.

However, the overall liquidity ratio declined to 43.9% – albeit higher than the regulatory minimum of 30% – as of September 2024 from 53.0% as at December 2024, due to the Central Bank of Nigeria’s higher cash reserve requirements and other tightening measures.

The funding base is considered stable, consisting primarily of low-cost customer deposits. Stable funding, including long-term funding and core customer deposits, typically accounts for over 75% of funding needs, while reliance on market funding is curtailed at about 3%.

Given Access’ franchise strength, GCR analysts expect good FX liquidity management as well as access to diverse funding sources to continue supporting the bank’s funding and liquidity position. It said Access’ moderate risk appetite is evident in the quality of its loan portfolio, which is deemed to perform better than those of the bank’s Nigerian peers.

Non-performing loans (NPLs) declined steadily from 5.8% in the 2019 fiscal year to 1.9% in 2022, albeit increasing slightly to 2.8% in 2023. GCR said in the rating that this was due to the June 2023 naira to US dollar devaluation, which pressured the foreign currency (FCY) loan portfolio.

The risk posed by FCY loans has since been managed down through proactive risk management and pay downs of FCY obligations by obligors. foreign currency NPLs ratio has consequently declined to 0.65% as of June 2024, from 0.98% as of December 2023, while the overall NPLs ratio declined to 2.7% over the same period.

“We expect asset quality to remain strong based on curtailed FX exposures in general, sustained portfolio diversification by sector and obligors, especially away from problematic sectors, natural hedging, and the purchase of FX forwards to manage similar portfolio risk,” GCR stated.

Access raised additional share capital of over N340 billion, or USD228.5 million, in the last quarter of 2024, bringing the balance of paid-up share capital (including share premium) to NGN594.8 billion (USD396.3 million).

The bank has therefore met the new capital requirements set by the Nigerian regulator for its license category ahead of schedule. However, the capital adequacy ratio (CAR) did not increase due to the offsetting effect of the increase in risk-weighted assets. A slight decrease from 21.1% at December 2023 to 20.6% at December 2024 was recorded.

The ‘GCR CAR’, on the other hand, is expected to remain within the range of 14.0% and 14.5% over the next 12 to 18 months. The rating note stated that core capitalisation is therefore modest relative to peers due to the bank’s sizeable risk-weighted assets.

GCR said going forward, the bank’s core capital could be further pressured as lending grows, but this may be mitigated by strong internal capital generation. Analysts expect the mitigation to happen as the bank enters the consolidation phase of its strategic implementation and robust risk management, especially with respect to foreign currency lending.

The stable outlook reflects Access's strong business and financial profile and our expectation that key credit metrics will remain within the assigned rating level, GCR Ratings said.