Moody’s Investors Service (“Moody’s”) has placed on review for downgrade Access Bank Plc’s (“Access”) B2 long-term local currency deposit rating, its B3 long-term foreign currency deposit rating, its b2 Baseline Credit Assessment (BCA) and Adjusted BCA, its B1 long-term Counterparty Risk Rating (CRR) and its B1 (cr) long-term Counterparty Risk Assessment (CRA).
At the same time, the rating agency has placed Diamond Bank Plc’s (“Diamond”) Caa1 long-term deposit ratings, its caa3 BCA and Adjusted BCA, its Caa1 CRR and its Caa1(cr) CRA on review for upgrade.
The move according to the firm follows the approval in principle granted by the Securities and Exchange Commission (SEC).
Merger discussions between the two lenders commenced late last year.
Reasons for the likely change in ratings
Access Bank would be downgraded due to the possibility of capital and asset pressures following the merger. Diamond Bank, on the other hand, may be upgraded due to an expected increase in credit worthiness following the consummation of the merger.
Access Bank, following the merger, will acquire about N1.6 trillion in assets. This is according to figures from Diamond Bank’s financial statements for the period ended September 30, 2018.
On the flip side, Diamond Bank may be upgraded due to the bank’s assets, liabilities and undertaken following the merger with Access Bank.
Criteria to be measured
For Access Bank, a downgrade would depend on the impact of the merger, on Access solvency ratios, as well as any integration challenges that could occur.
For Diamond, the review would entail measuring the expected positive impact of the merger on Access Bank’s deposit base, as well as the expected cost savings.
The review for both banks will, however, take place at the conclusion of the proposed merger. Court Ordered meetings for both banks are expected to take place on the 5th of March.
Access Bank, closed at N5.75 in yesterday’s trading session on the Nigerian Stock, Exchange, down 4.17%. Diamond Bank closed at N2.25, down 2.17%.