Despite capital injections of Zar1.4bln (N115 billion) by Access holdings, since its acquisition of Access Bank South Africa in 2021, persistent losses have continued for the subsidiary.
GCR a ratings agency forecasts a financial loss at year end 2024 for Access Bank South Africa, after the firm recorded losses in 2023.
Access Bank South Africa strategy challenged
Access Bank South Africa Limited is the 24th (out of 30) largest regulated banks in South Africa, with a market share across assets, loans and deposits of less than 0.1%.
The franchise has been relatively diminished over a 5-to-10-year period due to change in owners from the South African Bank of Athens to Grobank, which had different underlying strategies and core markets, and its current levels of capitalisation is being eroded by persistent losses.
The strategy of the bank now is to become South Africa’s leading tier two banking institution. The bank expects its core strengths to be in trade finance, servicing large African corporates banked by the group, Alliance banking and focusing on the relatively under-banked South African business banking space.
GCR notes that given the growth of the challenger retail banks and presence of large corporate focused international banks in South Africa, this is a significant ambition.
New capital injection may be needed
Capitalisation is expected to deteriorate in the short to medium term and Access Bank South Africa will have to return to shareholders or the market to increase capital soon.
Access Bank South Africa has delayed its audited financial reporting for 2022 (and the knock-on effect in 2023, the bank anticipates finalisation of the accounts by end July 2024) due to the change in core banking systems has caused a significant gap in transparency in comparison to peers.
Portfolio concentrations are high, in a South African context, with the top twenty exposures accounting for 46% and the single largest 28.5% of total risk exposures, respectively.
The bank’s funding base is predominantly made up of deposits, accounting for approximately 70%-75% of total funds. Depositor concentrations are higher than peers, with the top 10 depositors accounting for 33.5% of the deposit book.
The bank is currently in breach of two information covenants (single obligor and late annual financial statement submission) with an international multilateral, according to GCR.
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