Access Bank Plc has announced the issuance of commercial papers (CPs) worth up to N194 billion under its N400 billion CP programme.
The offering is structured into two series: Series 3 and Series 4 with varying tenors and yields.
Key details of the issuance:
- Series 3: 180-day maturity at a discounted rate of 19.44% (effective yield: 21.50%).
- Series 4: 270-day maturity at a discounted rate of 20.92% (effective yield: 24.75%).
- Subscription period: March 20 – March 25, 2025.
- Minimum subscription: N5 million, with subsequent investments in multiples of N1,000.
Providing a clearer picture, the discounted rate is the percentage discount applied when buying commercial paper. Instead of paying the full-face value upfront, investors buy it at a lower price and receive the full value at maturity.
On the other hand, effective yield represents the actual return an investor earns over the investment period, taking into account the time value of money.
Since commercial papers are sold at a discount and redeemed at full value, the effective yield is higher than the discounted rate because it reflects the true percentage gain over the holding period.
Purpose of the fundraising
Access Bank intends to use the proceeds from the CP issuance to meet short-term funding needs, including working capital requirements and general corporate purposes.
Financial performance of the Group
The Group is a diversified financial institution that combines a strong retail customer franchise and digital platform with deep corporate banking expertise, proven risk management and capital management capabilities.
As of Q3 2024, the bank reported total assets of N40.6 trillion, while customer deposits stood at N22.3 trillion
Gross earnings surged by 114.49% YoY to N3.418 trillion, driven by its core banking operations:
- Interest income accounted for 70% of total earnings, with income from loans and advances contributing 52% (+9.62% YoY), while interest income from investments in securities made up 35%, marking a 16% decline YoY.
Access Bank’s borrowing levels also increased, with total debt and borrowings reaching N3.771 trillion, a 52% rise YoY.
- Interest expenses on debt and borrowing stood at N198.503 billion, representing just 8.28% of total interest income.
Rating Agency perspective
Agusto & Co. affirms the “Aa” credit rating assigned to Access Bank Plc (“Access Bank” or “the Group”), reflecting its position as Nigeria’s largest bank by total assets and its growing franchise across the African continent.
The Group’s strong capitalisation, solid asset quality, robust refinancing capability, and experienced management team underpin the rating.
However, the rating is tempered by global economic fragility, a relatively high-cost profile compared to other Tier-1 banks, and challenges in key African markets.
Agusto & Co. also assigned an ESG score of “2”, indicating that environmental, social, and governance (ESG) factors have minimal impact on the bank’s credit profile.
Key takeaways to consider:
- Strong financial position: Access Bank’s “Aa” rating from Agusto & Co. reflects its solid financial position, strong asset base (N40.6 trillion), and growing franchise across Africa.
- Debt and interest expense management: Despite a 52% increase in total debt and borrowings to N3.771 trillion, the bank’s interest expenses remain at 8.28% of interest income. This suggests that Access Bank has the capacity to meet its short-term obligations.
- Governance and ESG considerations: The bank’s ESG score of “2” suggests that environmental, social, and governance risks have a minimal effect on its credit standing, indicating sound corporate governance practices and responsible banking operations.
- Inflation and real returns: As of February 2025, Nigeria’s headline inflation rate declined to 23.18%, down from 24.1% in January 2025. Given the Series 4 CP effective yield of 24.75%, it slightly surpasses inflation, potentially offering a marginal positive real return.
In contrast, the Series 3 CP effective yield of 21.50% is below the inflation rate, meaning the real return may be negative when adjusted for inflation.
- Comparison with treasury bills: As of March 2025, the one-year Treasury bill yield stands at 22.52%, providing a slightly lower return than Access Bank’s Series 4 CP (24.75%) but higher than Series 3 CP (21.50%).
Treasury bills, backed by the federal government, are virtually risk-free, while Access Bank’s CPs carry higher risk but also offer potentially higher returns.
Investors seeking higher returns and willing to take on moderate corporate risk may find Access Bank’s Series 4 CP more attractive than Treasury bills and FGN bonds.
