Ratings agency Moody’s has downgraded the ratings of Bidvest Bank after a 12-month review of the lender’s ratings, citing the move by the Bidvest group to dispose of its 100% stake in the bank to Nigerian multinational group Access Bank as a key reason behind the rating action.
Bidvest, an industrial conglomerate, is divesting from the financial services industry, where it has fallen short in building scale, and is turning its focus to its core, more profitable, businesses.
“Looking ahead, once the disposal is completed, Bidvest Bank will no longer benefit from the support it has historically enjoyed from being part of the Bidvest Group, though some parental support — such as the contingent funding line from Bidvest Group — will remain in place until the change of ownership is concluded,” Moody’s said.
“We now assign a ‘low’ probability of affiliate support, compared to a ‘high’ probability previously.
“When Access Bank announced its intention to acquire Bidvest Bank, it also noted that upon conclusion of this acquisition, Bidvest Bank will be merged with Access Bank’s existing South African subsidiary to create an enlarged platform to anchor its regional growth strategy for the Sadc [Southern African Development Community] region. Until now, no further details regarding this merger have been announced.”
Bidvest, worth R84bn on the JSE in 2024, agreed to sell its banking business to Access Bank for about R2.8bn.
Bidvest acquired Rennies Foreign Exchange in 1998 as part of the Rennies Group takeover. After obtaining a banking licence from the Reserve Bank, Rennies Foreign Exchange changed its name to Rennies Bank in 2000 and in 2007 it was renamed Bidvest Bank.
In 2011 it failed to acquire Mercantile Bank from Portugal’s state-owned Caixa Geral de Depositos. This was after the Portuguese authorities said Bidvest’s approach was hostile.
Mercantile Bank would later be acquired by Capitec, which renamed it Capitec Business as part of its strategy to win business banking market share.
Access Bank has been operating in South Africa since 2021, when it acquired Grobank.
Moody’s assigned a stable outlook to Bidvest Bank, saying the outlook reflects its assessment that the bank’s financial metrics will remain broadly stable, supported by good capital and liquidity buffers, “which balance the challenges from the bank’s relatively weak asset quality and limited business diversification”.
The rating agency said a rating upgrade would come due to a strengthening of the bank’s standalone assessment and from a potential strengthening of its franchise after its merger with Access Bank.
“Affiliate support uplift is unlikely, given Access Bank’s more limited capacity to provide support…. The ratings could be downgraded if there is a material weakening in the standalone credit profile of Bidvest Bank, as evident by a weakening in its solvency and/or liquidity metrics, either now or following the merger with Access Bank.”
In the 2023 financial year, Bidvest Bank generated trading profit and operating income of R234m and R219m, respectively. The Bidvest Bank book, which consists mainly of leased assets, loans and advances, totalled R5bn, funded by deposits of R8bn.
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