E-Financial
Fitch Places Diamond Bank, Access Bank on Rating Watch over Proposed Merger
Fitch Ratings, renowned rating agency, has placed Diamond Bank and Access Bank, on its rating watch, following the announcement of a proposed merger between the Nigerian lenders.
In a statement by Fitch, it said Diamond Bank’s Long-Term Issuer Default Rating (IDR) has now been downgraded to ‘CC’ from ‘CCC’ and Viability Rating (VR) to ‘cc’ from ‘ccc’ and placed its IDRs and VR on Rating Watch Evolving (RWE).
The agency also simultaneously placed Access Bank Plc on Rating Watch Negative (RWN).
It explained that the downgrade of Diamond Bank’s ratings reflects the deterioration in the bank’s foreign-currency (FC) liquidity position since the last review and an expected deterioration in the bank’s capital position following additional loan impairment charges (LICs) on the announced write-offs of stage 3 loans under IFRS 9, to take place by year-end.
Fitch noted that the Rating Watches (RW) follows a memorandum of agreement between the banks to merge. The merger is expected to be completed by end-June 2019. Although the agreement is subject to regulatory and shareholder approval, Fitch said it believes that the probability of the completion of the merger is sufficiently high to take rating action.
The RWE on Diamond Bank reflects Fitch’s view that its standalone creditworthiness could improve or deteriorate beyond the current ratings, depending on the realisation of the merger and the bank’s ability to meet its upcoming FC obligations prior to it.
The upside aspect of the RWE reflects the view that should Diamond Bank meet its near-term obligations and the merger be completed, it is likely to be positive for the bank’s creditors due to the stronger franchise and financial metrics of the combined entity.
Following completion of the merger, Diamond Bank will cease to exist as a separate legal entity, and Fitch will then withdraw its ratings.
However, the downside aspect of the RWE reflects significant risk with regards to the bank’s near-term FC liquidity position given its large short-term bullet repayments, including a $200 million Eurobond maturing in May 2019, $100 million from Afrexim due in March 2019, and $70 million from the International Finance Corporation due in July 2019.
Fitch said it also understands that some large long-term obligations have recently become current suggesting intensified liquidity pressure.
According to Diamond Bank’s FC liquidity plan, the bank should be able to meet its obligations using existing US dollar liquidity, proceeds from the sale of its UK subsidiary, cash flows from maturing US dollar loans (mainly from oil and gas loans), and by exchanging naira into US dollars through the interbank market.
However, the plan is based on a number of assumptions, including the completion of the sale of the UK subsidiary, which has not yet been approved by the Prudential Regulation Authority in the UK, and therefore liquidity remains tight and highly vulnerable.
Fitch said it also understands that Access Bank may provide some liquidity support to Diamond Bank, although it will not assume a direct liability for Diamond Bank’s debt payments pre-merger.
Fitch point out that Access Bank withdrawing from the deal would most likely be negative for Diamond Bank.
It said the RWN on Access Bank’s Long-Term IDR of ‘B’ and VR reflects the potentially negative impact on its financial metrics from the absorption of a weaker bank and execution risks post-merger.
Upon completion of the merger Fitch will assess the bank’s credit profile. A potential downgrade is likely to be limited to one notch. However, it is also possible that Access Bank’s ratings could be affirmed with a Stable Outlook if the impact from merger appears to be more moderate, given the bank’s currently sound financial metrics and the planned capital raising, and provided there are no additional unforeseen risks emerging from Diamond.
Diamond Bank’s stage 3 loans stood at 37 percent of gross loans at end-1H18. Additionally, the bank’s stage 2 loans stood at 23 percent of gross loans at end-1H18, indicating the extent of its weak asset quality.
Access Bank has better asset quality with stage 3 loans and stage 2 loans accounting for 5 percent and 14 percent of gross loans, respectively, at end-1H18.
Diamond Bank plans to take LICs of between N150 billion-N180 billion before writing off bad loans by end-2018. Diamond Bank’s total equity was N222 billion at end-9M18, meaning that its capital position at end-December 2018 following the write-offs will be materially weaker.
For regulatory capital calculations, Fitch said it understands that as per the central bank’s IFRS 9 transition guidelines, Diamond Bank will be able to phase-in the impact of additional LICs on its total capital adequacy ratio (CAR) over a four-year period, allowing it to remain above its 10 percent minimum regulatory requirement.
Access Bank estimates that its CAR should stand at around 20 percent (above its minimum regulatory capital requirement of 15 percent) post-merger, which will be helped by the expected $250 million Tier 2 capital issuance in January 2019 and strong retained earnings.
Fitch explained that the banks’ National Ratings reflect their creditworthiness relative to Nigeria’s best credit and relative to peers operating in the country. Diamond Bank’s National Long- and Short-Term Ratings have been downgraded to ‘CCC’ and ‘C’, respectively, from ‘B’ and ‘B’, reflecting its weaker credit profile relative to peers, it said.
It noted that Diamond Bank’s National Ratings have also been placed on RWE based on expectation that its assets and liabilities will be transferred to Access Bank’s balance sheet, but also that its credit profile may deteriorate further relative to peers’ in the interim, adding that the RWN on Access Bank’s National Ratings indicates potential downside risks of the merger.
Fitch said Diamond Bank’s senior unsecured debt rating has been downgraded to ‘CC’/’RR4’ from ‘CCC’/’RR4’, with the lender’s senior unsecured debt rating also placed on RWE, reflecting that on its Long-Term IDR. It stated that the Long-Term Ratings on Access Bank’s senior unsecured and subordinated debt have been placed on RWN, reflecting that on its Long-Term IDR.
The Bank of Industry, through BOI Financing SPV Plc, has opened subscriptions for its inaugural Series 1 Fixed Rate Bond worth up to N250bn under its $1bn multi-currency instruments programme, seeking to raise long-term capital to finance businesses across Nigeria’s priority sectors.
The offer, which opened on 5 August and closes on 11 August, is being arranged by Chapel Hill Denham as the lead issuing house. The five-year bond is priced within a yield range of 17.35 per cent to 17.50 per cent and will be listed on the FMDQ Securities Exchange.
According to the offer document, proceeds from the issuance will be deployed to finance eligible businesses and projects across sectors, including agriculture and food processing, healthcare, engineering and technology, renewable energy, petrochemicals, oil and gas, creative industries and solid minerals, in line with BOI’s development finance mandate.
The lender said the financing is expected to improve access to medium and long-term funding for Nigerian enterprises, expand productive capacity, create and preserve jobs, deepen local value addition, support import substitution, boost exports and strengthen domestic value chains.
BOI, Nigeria’s foremost development finance institution, said it has provided funding to more than one million businesses across the country and disbursed over N1.27tn between 2023 and 2025. The institution operates across 34 states and the Federal Capital Territory and is jointly owned by the Ministry of Finance Incorporated and the Central Bank of Nigeria.
The bank also highlighted its financial performance, reporting a 36 per cent compound annual growth rate in gross earnings between 2021 and 2025.
Interest income rose 64 per cent to N884bn in 2025 from N538bn in the previous year, while its capital adequacy ratio stood at 39 per cent, nearly four times the regulatory minimum of 10 per cent. Its non-performing loan ratio was 1.7 per cent, below the CBN’s prudential limit of five per cent.
The bond has been assigned AAA ratings by Agusto & Co. and Intelligence Africa, reflecting the issuer’s strong capitalization, profitability, liquidity and ownership structure.
The issuance is open to institutional and qualified investors with a minimum subscription of N5m and additional investments in multiples of N1m. Interest will be paid semi-annually at a fixed rate, while principal repayment will begin in the third year through equal semi-annual amortised instalments until maturity in 2031.
The bond is also exempt from tax, making it an attractive investment option for investors seeking stable returns amid expectations of declining interest rates.
E-Financial
SEC Unveils Probate/Unclaimed Monies Clinic to Help Families Recover Inherited Investments
Securities and Exchange Commission (SEC) has intensified efforts to reduce unclaimed funds and other dormant investment assets by launching a Probate/Unclaimed Monies Awareness and Investor Clinic aimed at helping beneficiaries recover inherited investments and strengthening investor protection in Nigeria’s capital market.
Speaking at the opening of the clinic in Abuja organised by the Commission in partnership with Meristem on Thursday, Dr. Emomotimi Agama, director-general, SEC, said the initiative was designed to bridge the gap between investors’ legal entitlements and their ability to access inherited assets.
He noted that many Nigerian families face prolonged delays in accessing shares, dividends and other investments after the death of loved ones because they are unfamiliar with probate procedures, documentation requirements and registrar processes.
“For many Nigerian families, the death of a loved one who held shares, dividends, or other investments marks the beginning of a long and often confusing journey,” Agama said.
Describing unclaimed funds and dormant assets as a persistent challenge, he said they represent “real money that belongs to real families, sitting idle, disconnected from the people it was meant to serve.”
According to him, the Commission is committed to closing the gap through policy initiatives and direct engagement with investors.
He explained that the clinic brought together the Federal Ministry of Justice, the Probate Registry, the National Population Commission and capital market registrars to provide practical guidance on probate procedures, required documentation and the recovery of inherited investments.
“Today is not simply an awareness session. It is a working clinic, designed to equip you with practical knowledge: how probate works, how to obtain the right documentation, and how to recover what is rightfully yours,” he said.
Agama stressed that SEC’s mandate to protect investors extends beyond the lifetime of shareholders.
“This Commission exists to protect your rights in the capital market, and that protection does not end when a shareholder passes on. It extends to ensuring their beneficiaries can access what is due to them without unnecessary hardship,” he added.
Also speaking, Ms. Nkechinyelu Okoye, acting chief executive officer, Meristem Registrars and Probate Services Limited, identified lack of awareness and poor estate planning as key reasons billions of naira in financial assets remain unclaimed.
“There are three categories of beneficiaries that we encounter quite often. The first are those who think only land, houses and other physical assets can be transferred legally from deceased loved ones. They do not realise that financial assets such as shares, fixed income investments and even money in savings apps also form part of an estate,” she said.
Okoye said another group consists of beneficiaries who are unaware their deceased relatives owned financial assets, while a third group knows the investments exist but does not understand the claims process or required documentation.
“I dare add a fourth category. These are investors who do not provide or update their KYC documents and, as a result, when they pass on, their loved ones have no idea they have investments to claim,” she said.
According to her, these factors have contributed to the rising volume of unclaimed dividends, dormant accounts and other abandoned financial assets.
“All of these categories contribute to the several unclaimed assets lying all around. Ultimately, financial resources that could have been beneficial to these beneficiaries remain inaccessible,” she said.
She described the investor clinic as more than an awareness programme, saying it would provide practical support to investors, beneficiaries, executors and administrators.
“Our goal is to empower investors, beneficiaries, executors, administrators and the general public with the knowledge they need to navigate probate and estate administration with greater confidence,” Okoye said.
She also urged investors to prepare valid wills, maintain accurate shareholder records and regularly update their Know Your Customer (KYC) information to make it easier for beneficiaries to access inherited investments.
“We want investors to appreciate the importance of preparing a valid Will, maintaining accurate shareholder records and ensuring that their affairs are properly organised. Taking these simple steps today can save families considerable stress and delay in the future,” she added.
The SEC said the clinic forms part of its broader investor protection strategy and provides participants with direct access to experts on tracing investments, verifying shareholder records, resolving probate-related issues and recovering unclaimed capital market assets.
Nigeria Deposit Insurance Corporation (NDIC) has reassured on the multiple layers of protection for the Nigerian banking industry with more than 98 per cent of depositors and 281 million accounts insured by the corporation.
Thompson Sunday, managing director, NDIC, gave the assurance in Lagos at the retreat for members of the House Of Representatives Committee on Insurance and Actuarial Matters.
He said that striking the right balance between innovation, consumer protection, and financial stability remains a key policy imperative.
The theme of the retreat was “Strengthening the Financial Safety Net in an Era of Banking Sector Recapitalisation and Fintech Innovation”.
He said the increasing digitisation of financial services has heightened exposure to cyber threats, fraud, data breaches, and operational risks.
He said that with banks’ adoption of emerging technologies, regulators and safety-net participants must remain proactive in identifying and mitigating these risks while encouraging innovation.
Sunday also highlighted the rapid growth of financial technology (fintech) which has revolutionised the way financial services are delivered.
He said: “Digital banking platforms, mobile money services, payment solution providers, and other fintech innovations have expanded access to financial services and accelerated progress toward financial inclusion. Millions of previously unbanked and underserved Nigerians now have access to formal financial services through digital channels”.
He said that as the banking industry adjusts to higher capital requirements and technological innovations reshape financial service delivery, adding that its imperativefor banks to reinforce rules that safeguard financial stability and protect depositors’ funds.
According to him, a strong and well-coordinated financial safety net system is necessary for maintaining stability and resilience in any modern financial system.
“It promotes public confidence, protects depositors, supports orderly resolution of distressed financial institutions, and helps prevent systemic crises. At a time when Nigeria is pursuing ambitious economic growth objectives, including the goal of attaining a one trillion-dollar economy in 2030, a robust and credible financial safety net is essential to maintaining depositors’ and investors’ confidence and enhancing financial system resilience,” Sunday said.
He said the recently concluded banking sector recapitalisation programme represents a significant milestone in strengthening the capacity of Nigerian banks to support economic development.
“Well-capitalised banks are better positioned to absorb shocks, finance large-scale investments, support enterprise growth, and withstand periods of economic uncertainty. However, while recapitalisation enhances the resilience of financial institutions, it must be complemented by effective regulation, sound governance practices, strong risk management frameworks and good compliance culture, all attribute of a reliable financial safety net,” Sunday said.
He said the stability of the financial system depends largely on the trust that depositors and investors place in financial institutions.
He said: “History has shown that where confidence is low, distress can spread rapidly, threatening the stability of, not only the financial system but the wider economy. It is, therefore, essential that institutions responsible for financial stability continue to strengthen measures that preserve and enhance public trust.
Also speaking, opening remarks, Ahmadu Usman Jaha, chairman, House Committee on Insurance and Actuarial Matters, said financial systems across the globe are being reshaped by rapid technological advancement, digital financial services, artificial intelligence, cybersecurity risks, and changing customer expectations.
He said Nigeria is undertaking one of the most significant banking recapitalisation exercises in its recent history, requiring banks to strengthen their capital base while remaining innovative, resilient and competitive.
“These developments present enormous opportunities for economic growth, financial inclusion and innovation. However, they also introduce new categories of systemic risks that require stronger institutions, modern regulatory frameworks, and robust financial safety nets capable of maintaining public confidence under all circumstances,” he said.
He explained that Nigeria’s banking industry continues to occupy a central position in our economy with banking sector assets running into several trillions of naira and serving tens of million of depositors across conventional banking channels and rapidly expanding digita platforms.
“Equally important is the rapid expansion of financial technology. While fintech innovation has significantly increased financial inclusion and payment efficiency, it also raises complex issues relating to cyber resilience, operational risk, consumer protection, digital fraud, and the scope of deposit insurance coverage. These are issues that require continuous legislative attention and collaborative policy responses,” he stated.
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