Tier one lender and one of the FUGAZ banks, Access Bank will redeem a $400 million Eurobond, which was due by 2021 this year. Chief Financial Officer (CFO) of the bank, Seyi Kumapayi disclosed this.
In addition, he stated that the bank is considering other funding sources to keep its capital adequacy ratio at 20%, higher than regulatory requirements.
Another FUGAZ member, FBN Holdings in August redeemed a $300 million Eurobond that was due in 2020.
What does CAR mean?
Capital Adequacy Ratio (CAR) is basically the proportion of the bank’s tier 1& tier 2 equity (Qualifying capital or Equity) as a proportion of its risk-weighted assets (loans). It is the proportion of bank’s own equity in relation to its risk exposure.
The capital adequacy ratio (CAR) for banks in Nigeria currently stands at 10% and 15% for national/regional banks and banks with an international banking licence, respectively.
Possible reasons behind the move
Though not stated, a looming devaluation would make bond payments more expensive, as the bank would need. Though, CBN Governor Godwin Emefiele has signalled the apex bank willingness to defend the current exchange rate, dipping crude oil prices has led to pressure on the nation’s foreign reserves. The apex bank could decide to ease the defence after the elections.
Access Bank closed at a year low of N7 in today’s trading session on the NSE, down 1.41%. Results for the nine months ended September 30, 2018 show interest income increased from N245 billion in 2017 to N272 billion in 2018.
Profit before tax dipped from N72.9 billion in 2017 to N70 billion in 2018. Profit after tax however rose from N56.3 billion in 2017 to N62.9 billion in 2018.
