Access Bank’s assets are exposed to a fall in oil prices and a depreciation of the naira. 

This is the finding reported in a report by a topmost rating agency, Moodys.

“Access’ asset quality remains vulnerable to an oil price decline or a depreciation of the naira, the local currency, because of its high exposure to the cyclical oil and gas sector and foreign currency-denominated loans,” the report said. 

Sighting Access bank’s nine-month result which was released on September 9, Moodys said 30 percent of the lender’s gross loan was owned by debtors in the oil and gas sector. 

These debtors are also responsible for more than half of the bank’s none performing loans (NPL’s). 

The rating agency also noted that 35 percent of the financial institution’s loan book was denominated in foreign currencies, which is "exposing the bank’s clients that do not earn foreign currency revenue to high risk of default on their foreign currency loans".

Moodys also observed that Access Bank’s net value reduced from 10 percent to 9 percent. This implies a 1 percent drop in the size of what a shareholder can receive when the commercial lender’s total assets are deducted from its total liabilities – an indication of the bank’s value. 

The report noted that the expected net value of shareholder equity to asset ratio of a bank of Access’ standing, should be a minimum of 13 percent. 

Moodys, however, observed that the bank had reduced its NPL’s to 6.4 percent, despite absorbing a huge NPL portfolio of 40.4 percent from Diamond Bank, which were not fully provisioned for.

The firm stated that the NPL ratio of the newly merged institution dropped from 14.1 percent as of January 2019 to 6.4 percent as of June 30, 2019. 

Moodys also noted that the bank increased its covering for NPL’s which would allow it to take out more bad debt in the coming future.

“A lower NPL ratio will provide the bank with room to grow its assets, supporting revenue growth,” Moodys said. 

The firm also observed that the institution’s net interest margin (NIM) improved from 5.6 percent to 7.6 percent between June 2018 and June 2019. 

This implies that there was an improvement in the investment decisions of the bank when compared to its debt standing. 

In all, Moodys described the bank as being solvent.


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