Access Bank is struggling to attract cheaper low-cost demand deposits as it relies on a higher percentage of term deposits compared to peers, leading to the lowest CASA ratio among the tier-one Fantastic Five Banks.
The CASA ratio, short for Current and Savings Account ratio, is a key financial metric that indicates the proportion of a bank’s total deposits that are held in low-cost, readily accessible current and savings accounts.
A higher CASA ratio generally suggests a bank’s financial health and operational efficiency, as it indicates a larger reliance on relatively inexpensive funding sources.
For Access Holdings, its CASA ratio stood at 69.27% at the end of 2024. This compares with 88.5% for United Bank for Africa (UBA), 87% for Guaranty Trust Holding Company (GTCO), FirstHoldCo at 86.10% and Zenith Bank at 76.70%.
“It’s been a challenge for Access…their CASA ratio has always been the lowest of the top-tier banks even after they became the largest bank, in terms of balance sheet and purported customer count. They have always been funded by a relatively higher percentage of term deposits to total deposit, relative to peers,” a banking sector analyst and economist told MoneyCentral.
“This also explains why their cost of funds has always been higher than peers and it is indeed a signal of relatively weaker fundamentals of the bank, including the effectiveness of its asset utilization and the sustainability of its earnings.”
Term deposits of N6.92 trillion made up some 30.7% of Access Holdings total deposits from customers of N22.52 trillion as at December 2024.
A term deposit, also known as a fixed deposit or time deposit, is a type of savings account where you lock your money for a specific period in exchange for a guaranteed, higher interest rate than a regular savings account.
Term deposits made up 12.6% of Guaranty Trust Holding Company (GTCO) N10 trillion in total customer deposits as at December 2024, 23.24 percent of Zenith Banks total deposits of N21.95 trillion, 13.8 percent of FirstHoldCo’s total customer deposits of N17.1 trillion and 11.5% of United Bank for Africa (UBA) total customer deposits of N22.52 trillion in 2024, (see table).
“As the largest bank in the country, one would have expected Access Holdings to have the highest CASA and indeed be a major provider of liquidity in the interbank market,” a second banking source told MoneyCentral.
Ideally, the larger a bank is, the more should be its ability to mobilize retail deposits because of its expansive branch network, digital infrastructure, brand, large pool of customer base and human resource capacity, which should attract more stable retail deposits, and as such the lower should its cost of funds be, a second banking source told MoneyCentral.
Access had the highest customer deposits at N22.524 trillion among the Fantastic Five Banks as at December 2024, more than double GTCO ‘s customer deposits which came in at N10 trillion.
Total assets for Access Holdings came in at N41.49 trillion as at December 2024, compared with UBA at N30.32 trillion, Zenith Bank at N29.95 trillion, FirstHoldCo at N26.52 trillion and GTCO at N14.79 trillion.
Commercial Paper issuance
Access is sometimes a net taker of funds in the Nigerian interbank market and one of the banks offering relatively higher rates to attract wholesale term deposits, according to the second banking source.
“Whilst there is nothing wrong in raising commercial papers, doing so at a time when the banking system is considered liquid also reinforces the signal of its liquidity pressure,” the source said.
Access Bank last month issued up to N194 Billion as part of its Series 3/4 Commercial Papers (CP).
Access Bank paid up steeply for the CP cash as the 180 Day Commercial paper had an implied yield of 19.45% while the 270 Day Commercial Paper had an implied Yield of 24.75%, according to the Pricing Supplement for the Offer seen by MoneyCentral.
“The net proceeds from each issue of Notes will be used to support the Issuer’s short-term working capital and its lending activities or as may otherwise be described in the Applicable Pricing Supplement,” Access Bank said.
Rest of Africa and ex-Nigeria pressures
The first banking source told MoneyCentral that Access CASA numbers could also be under pressure by its exposure to the rest of Africa operations, where competition to attract deposits is fierce and most times, Access is a new entrant in those markets.
“Most of the subsidiaries outside of Nigeria are really funded mainly with expensive wholesale deposits, like a pure Treasury play in those markets,” the source said.
GCR Ratings forecast a financial loss at year end 2024 for Access Bank South Africa, after the firm recorded losses in 2023.
Nigeria operations made up 67% of Access Holdings revenues from total continuing operations in 2024 with rest of Africa contributing 22% and Europe 10.3%, according to data from the banks 2024 audited financial statement.
For analysts the inability to attract cheaper low cost deposits is a headscratcher.
“Access Bank has perhaps the highest cost of funds amongst the top-tier players, a paradox to it’s size and potential capacity,” the first source said.
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