Moody’s Investors Service completes review ratings of 9 Nigerian banks

MOODY’S Investors Service (‘Moody’s’) has completed a periodic review of the ratings of nine Deposit Money Banks (DMBs) in Nigeria. They are: UBA, Sterling Bank, Union Bank, FCMB, Access Bank, Fidelity Bank, First Bank, Guaranty Trust Bank and Zenith Bank.

Key rating considerations are summarized below. For the United Bank for Africa (UBA) Plc, it noted that the B2 long-term local currency deposit rating is at the same level with the bank’s b2 baseline credit assessment (BCA).

“UBA’s BCA reflects its moderate asset risk because of its more diversified loan book, and the bank’s resilient profitability, although expected to reduce.

“The ratings also reflect the bank’s deposit-based funding profile. These strengths are moderated by the bank’s rising market funding and its exposure to Nigeria, which is experiencing a challenging operating environment, worsened by the depressed oil prices and ongoing coronavirus pandemic,” it stated.

Sterling Bank Plc’s b2 long-term local currency deposit rating is one notch above its b3 baseline Credit Assessment (BCA).

Sterling’s b3 BCA, according to the agency, reflects its high asset risks amid modest capital and profitability, and relatively low volume of foreign currency liquidity.

“The ratings also reflect Nigeria’s challenging operating environment that is worsened by the depressed oil price and the ongoing coronavirus pandemic. These challenges are balanced against the bank’s stable deposit-based funding profile and its satisfactory stock of liquid local currency assets,” it said.

Union Bank of Nigeria Plc’s b2 long-term local currency deposit rating is one notch above its b3 baseline credit assessment (BCA).

Union’s b3 BCA reflects the bank’s high asset risks due to elevated concentration risks amid Nigeria’s difficult operating environment that is exacerbated by the coronavirus pandemic and depressed oil prices, and its modest profitability, the agency said.

These challenges are counterbalanced by the bank’s stable deposit-based funding profile and satisfactory local currency liquidity. That is supported by the bank’s solid retail deposit franchise.

Continuing with the key rating considerations, Moody’s stated that Fidelity Bank Plc’s b2 long-term local currency deposit rating incorporates a one-notch uplift from its b3 baseline credit assessment (BCA).

Fidelity’s b3 BCA reflects the bank’s vulnerability to high asset risks due to its large proportion of foreign currency denominated loans, a relatively tighter funding profile as reflected by its high loans-to-deposit ratio, and moderate profitability, which is expected to be pressured by Nigeria’s challenging operating environment, it said in a latest report released on Friday. These challenges are balanced against the bank’s satisfactory capitalisation.

For Access Bank Plc, it stated that b2 long-term local currency deposit rating incorporates one notch of government support from the bank’s b3 baseline credit assessment (BCA).

Access’ b3 BCA according to Moody’s, reflects the bank’s high asset risks, although improving, and higher leverage than peers in a challenging operating environment that is worsened by the depressed oil prices and ongoing coronavirus pandemic.

These challenges are balanced against Access Bank’s resilient profitability, a deposit-based funding structure and good local currency liquidity buffers.

First Bank of Nigeria Limited’s B2 long-term local currency deposit rating is one notch above its b3 baseline credit assessment (BCA).

“First Bank’s BCA reflects its improving asset quality, satisfactory capital buffers and resilient profitability that is supported by its strong capacity to generate good levels of pre-provision income. The ratings also reflect the bank’s stable deposit-based funding profile, high stock of liquidity assets and resilient foreign currency liquidity buffers.

“These strengths are moderated by Nigeria’s challenging operating environment that is worsened by depressed oil prices and ongoing coronavirus pandemic.

“Our view of the creditworthiness of First Bank is based on FBN Holdings Plc’s (FBNH) public financial statements,” it stated.

Moodys further explained that FCMB (First City Monument Bank) Limited’s B2 long-term local currency deposit rating incorporates a one-notch uplift of government support from the bank’s b3 baseline credit assessment (BCA).

FCMB’s b3 BCA reflects the bank’s robust capitalization and stable deposit-based funding as well as good local currency liquidity buffers. These strengths the agency said, are balanced against FCMB’s high asset risks driven by its high single-name and sector concentrations amid Nigeria’s challenging operating environment and the bank’s modest profitability.

Guaranty Trust Bank Plc’s (Guaranty Trust) B2 long-term local currency deposit rating is in line with the bank’s b2 baseline credit assessment (BCA).

GTBank’s b2 BCA reflects its strong capitalization and solid profitability which provide significant buffers to absorb expected asset quality deterioration. The ratings also reflect the bank’s good liquidity cushion and its deposit funded balance sheet.

These strengths it stated are balanced against Nigeria’s difficult operating environment that is exacerbated by depressed oil prices and the ongoing coronavirus pandemic.

Zenith Bank Plc’s (Zenith) B2 long-term local currency deposit rating is in line with the bank’s b2 baseline credit assessment (BCA).

Zenith’s b2 BCA reflects the bank’s good capitalization and profitability, which combined, provide a good buffer to withstand expected asset quality deterioration. The ratings also reflect the bank’s significant liquidity buffers and its deposit funded balance sheet that benefits from its robust franchise.

These strengths are balanced against Nigeria’s difficult operating environment which is worsened by the depressed oil prices and the ongoing coronavirus pandemic, and the bank’s relatively high proportion of confidence-sensitive corporate deposits to total deposits.

According to the agency, “this publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future.

“Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement,” it said.

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