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TEXT-S&P summary: Access Bank PLC
(The following statement was released by the rating agency)
July 02 -
Summary analysis -- Access Bank PLC ------------------------------- 02-Jul-2012
CREDIT RATING: B+/Stable/B Country: Nigeria
Primary SIC: Commercial banks,
Credit Rating History:
Local currency Foreign currency
12-Mar-2009 B+/B B+/B
Ratings Score Snapshot
Issuer Credit Rating B+/Stable/B
Business Position Adequate (0)
Capital and Earnings Moderate (0)
Risk Position Moderate (-1)
Funding and Liquidity Average
and Adequate (0)
GRE Support 0
Group Support 0
Sovereign Support 0
Additional Factors 0
Major Rating Factors
-- Improving business position due to merger with Intercontinental Bank PLC.
-- Strong liquidity indicators.
-- Reducing cost of funds and a loan-loss experience that compares well to peers.
-- High percentage of foreign-currency lending.
-- Moderately high single-name and industry loan concentrations.
-- Moderate capitalization and contractually short-term funding.
The stable outlook on the bank reflects our expectation that the next two years will see stable economic growth and a stable currency.
We forecast that GDP growth will be around 6% in 2012/2013. Oil prices will likely provide ample government revenues, enabling the government to continue to spend on infrastructure and boost growth in the private sector.
Access is expected to use its improved market position, lower cost of funds, and larger branch network to consolidate its position in the top tier of the Nigerian banking sector. Because we expect the oil price and domestic currency to remain relatively stable, we do not anticipate that Access' risk position will worsen materially in the medium term. However, as we assess the loan book as exposed to currency fluctuations and the oil and gas sector, we view the bank (and most of its peers) as exposed to external shocks. If, in our view, the likelihood of an external shock has increased, we could take negative rating action.
We could also lower the rating if we were to assess the risks from foreign currency lending, loan concentrations, or rapid growth as increasing.
We expect that Access Bank will maintain a RAC ratio above 5% for the next 12-18 months, given moderate forecast growth, stable cost of risk, and an improvement in capital generation. However, we could lower the rating if Access Bank's RAC ratio were to fall below 5% as a result of quicker-than-expected loan growth or lower-than-expected internal capital generation.
The issuer credit rating on the bank is currently capped by that on the Federal Republic of Nigeria (B+/Positive/B). If we were to raise the sovereign rating and we saw that capitalization and the bank's risk position had improved, we could raise the rating on the bank. Our view of the bank's risk position would improve if we saw evidence of a better track record of risk coverage of foreign-currency lending, moderate loan growth, and stable loan-loss experience.
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