Downgrade warning for one of South Africa’s major banks

 ·13 Jan 2025

Bidvest Bank is at risk of a rating downgrade due to the proposed acquisition by Nigeria’s largest lender by assets, Access Bank.

In December 2024, the Bidvest Group said it would sell 100% of Bidvest Bank Holdings Limited to Access Bank plc for R2.8 billion.

The acquisition is expected to be finalised in the second half of 2025, subject to regulatory approvals in South Africa and Nigeria.

The Bidvest Bank book, which mainly consists of leased assets, loans and advances, totalled R6 billion in December, funded by deposits of R8 billion.

Bidvest Bank generated a trading profit of R371 million and an operating income of R377 million in its most recent financial year.

After the finalisation of the acquisition, Bidvest Bank will be merged with Access Bank’s existing South African subsidiary to create an enlarged platform to anchor the regional growth strategy for the SADC region.

However, Moody’s has placed Bidvest Bank on review for downgrade to the following ratings:

  • The Ba2 domestic-currency long-term issuer rating;
  • The Aa2.za national scale domestic-currency long-term issuer rating;
  • The P-1.za national scale short-term issuer rating;
  • The ba3 Adjusted Baseline Credit Assessment (Adjusted BCA); and
  • The b2 BCA.

The main reason for the potential downgrade is that Access Bank’s rating (long-term deposit ratings of Caa1 positive, Baseline Credit Assessment of caa1) is far lower than Bidvest Bank’s current rating (long-term Corporate Family Ratings of Ba2 stable).

Access Bank’s Caa1 rating is judged as poor quality and very high credit risk.

“The review for downgrade on the domestic-currency long-term issuer rating and the Adjusted BCA of Bidvest Bank will primarily focus on assessing the progress in the acquisition process, including the obtention of regulatory approvals, and the likelihood of the acquisition being completed,” said Moody’s.

“A successful completion of the acquisition by Access Bank could lead to a multi-notch downgrade of Bidvest Bank’s issuer rating due to the loss of two of the notches of parental support uplift from Bidvest Group.”

“This is because the potential new shareholder, Access Bank, has both a lower capacity than Bidvest Group to support the bank, as indicated by the lower rating of Access Bank in comparison to that of Bidvest Group; and a lower rating than Bidvest Bank itself.”

Moody’s said that Bidvest Bank’s current Ba2 domestic-currency long-term issuer rating benefits from two notches of uplift from its b2 BCA. This reflects the high chance of affiliate support from Bidvest Group if the need arises.

The Bidvest Group is expected to safeguard the bank’s financial health and operational stability despite the impending divestment.

The review for downgrade on the bank’s standalone BCA looks at the uncertainties regarding the future strategic direction of the bank post-disposal.

Moody’s said that this “includes the potential disruption to its activities during the disposal process as well as the bank’s post-acquisition financial fundamentals, which will depend on how it is combined with Access Bank’s existing South African operations.”

It added that the review will also assess whether the current positioning of Bidvest Bank’s b2 standalone BCA two notches above Access Bank’s caa1 standalone BCA would remain appropriate in case of successful completion of the acquisition.

Moody’s said a parent entity’s creditworthiness can directly and indirectly affect the credit standing of its bank subsidiaries.

“The bank’s b2 BCA reflects the bank’s solid capitalisation, high liquidity and improving profitability, underpinned by solid niche franchises in the fleet finance and management segment, as well as in the foreign exchange segment,” said Moody’s

“These strengths are moderated by the bank’s weak asset quality and relatively modest deposit-gathering franchise.”

“There is limited upside potential on the ratings given the review for downgrade.”

Seyi Kumapayi, Executive Director of African Subsidiaries at Access Bank Plc and Mpumi Madisa, CEO of Bidvest Group

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