Rating agency Moody’s has given Nigeria’s Access Bank its first rating, assigning the tier-one bank a Ba3 rating for local and foreign currency issues and B1 rating for foreign currency deposits – in line with the sovereign.
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Herbert Wigwe, |
However, the bank – under CEO Herbert Wigwe – has no immediate plans to raid the Eurobond market.
“We won’t be issuing a bond on the back of this rating, but our $350 million five-year Eurobond will expire in two years’ time so we may look to issue more international debt then,” says Tobi Akinbiyi, head of strategy and planning at Access Bank.
Moody’s cited solid asset quality, improvements in loan underwriting standards, and robust capital and liquidity buffers, balanced against a challenging operating environment and concentration towards the oil and gas sector risks.
Year-to-date, there has been no international debt issued by Nigerian banks, amid weak investor appetite for frontier economies, the election-related market slowdown, and ample liquidity buffers at financial institutions.
In recent years, Nigerian banks have been active in local and international debt capital markets. Access Bank, Diamond Bank, Zenith Bank and Guaranty Trust Bank have issued Eurobonds.
Pressure on the Nigerian banking system has been mounting, given the sector's exposure to the oil and gas sector, as NPL ratios begin to tick up.
Access Bank, however, has has managed to hold up against headwinds. Profit for the bank in the first quarter of 2015 was up from N11.6 billion to N13.7 billion, return on equity fell slightly from 19.4% to 19.2% within the same time period and NPL ratios fell from from 2.5% in March 2014 to 2.1% a year later.
For comparison, Guaranty Trust Bank is 3.1% for the first quarter of 2015, though this is 0.3% lower than over the same period last year.
Behind the curve
Moody’s rating comes one week after the agency rated their first Nigerian bank, Sterling Bank, B2. Rating agencies Standard and Poor’s and Fitch already rate Access Bank B+ and B respectively, and rate various other banks in the Nigerian market.
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Moody’s first assigned a sovereign rating to Nigeria in November 2012. Since then, the rating has remained steady with a stable outlook.
It is understood that other Nigerian banks have been rated by Moody’s, but have decided not to publish results.
“These are early steps in Nigeria for Moody’s, but these recent rating are a signal of our commitment to the country,” says Jean-Francois Tremblay, associate managing director, at Moody’s.
“This is the right time to enter and start rating Nigerian banks. While some banks have developed relationships with and have exposure to international counterparties, for the most part, these transactions are still at an early stage."