Banking

Fitch Downgrades Union Bank’s National Rating to ‘BBB-(nga)’

Published

6 years ago

05/12/2018

By Dipo Olowookere

The National Long-Term Rating of Union Bank of Nigeria Plc’s BBB(nga) has been downgraded to BBB-(nga) by Fitch Ratings.

In a statement issued by the rating agency, it however, said the lender’s Long-Term Issuer Default Rating (IDR) has been affirmed at ‘B-‘ with stable outlook.

Fitch said the downgrade of Union Bank’s National Long-Term Rating mainly reflects its view of weaker asset quality relative to Nigerian peers’, as highlighted by the bank’s disclosure under IFRS 9.

According to the statement released on Tuesday, the rating company said the IDRs of Union Bank are driven by its standalone creditworthiness, as defined by its Viability Rating (VR).

Union Bank’s VR, as with that of other Nigerian banks, is highly conditioned by Nigeria’s operating environment, with the fragile economic recovery restraining banks’ growth prospects and asset quality, Fitch said.

It added that the financial institution’s VR further reflects a moderate franchise, weak profitability, severe loan-quality problems and adequate capitalisation, funding and liquidity.

However, it noted that the stable outlook reflects Fitch’s base case expectation that Union Bank’s credit profile is unlikely to change significantly over the next one-to-two years.

Union Bank’s operations are concentrated in Nigeria and the lender accounted for 4 percent of banking system assets at end-2017.

Union Bank’s stock of impaired loans is declining, the statement noted, as is its exposure to the troubled oil sector. However, the bank’s impaired loans (stage 3 loans under IFRS 9) ratio (24% at end-1H18) is very high compared with the 9.4% average for rated Nigerian banks, driven primarily by its oil sector exposure, it added. Stage 2 loans measured at a further 30 percent of gross loans at end-1H18. Reserve coverage of impaired loans (32% at end-1H18) is low, reflecting management’s view of collateral on impaired loans, Fitch said.

Furthermore, the rating firm said Union Bank is exposed to large credit concentrations. The 20-largest loans measured at 71 percent of gross loans and 128 percent of Fitch Core Capital (FCC) at end-1H18. The volatile oil sector represented 45 percent of Union Bank’s gross loans at end-1H18.

Union Bank’s operating profit/risk-weighted assets ratio was 1.8 percent in 2017 (compared with rated-banks average of 4 percent), which is weak by emerging market standards.

The bank has a high net interest margin, but this is offset by a high cost-income ratio and large loan impairment charges that have eroded around 55 percent to 65 percent of pre-impairment operating profit in recent years.

Capital metrics are somewhat better than similarly-sized peers’, having improved following a rights issue in 2017, Fitch said. However, as a result of IFRS 9 implementation from this year, Union Bank’s FCC ratio declined to 24 percent at end-1H18 (end-2017: 31 percent), the company added.

Union Bank’s high FCC ratio must be considered in the context of the bank’s large unreserved impaired loans, which measured at 45 percent of FCC at end-1H18.

Union Bank benefits from a strong retail deposit base, which accounted for 52 percent of customer deposits at end-1H18, providing an inexpensive source of stable funding. Single-depositor concentration is in line with peers’, with Union’s 20-largest deposits accounting for 21% of the total at end-1H18. Union Bank’s loans/customer deposits ratio (62 percent at end-1H18) sits at the lower end of the peer group.

Foreign-currency liquidity has been tight in recent years, with Union Bank restructuring some trade finance obligations with international correspondent banks in 2015 and 2016. Foreign-currency liquidity pressures have eased and are no longer a significant rating weakness.

Fitch said it believes that sovereign support to Nigerian banks cannot be relied upon given Nigeria’s weak ability to provide support, particularly in foreign currency. In addition, it said there are no clear messages of support from the authorities regarding their willingness to support the banking system.

“Therefore, the Support Rating (SR) and Support Rating Floor (SRF) are ‘5’ and ‘No Floor’, respectively. This reflects our view that senior creditors cannot rely on receiving full and timely extraordinary support from the Nigerian sovereign if any of the banks become non-viable,” the statement said.

It further noted that Union Bank’s Long-Term IDR is sensitive to a change in the bank’s VR. Downside pressure is most likely to result from a material worsening of impaired loans, including the migration of stage 2 loans into the stage 3 category, putting pressure on capital adequacy. A positive rating action is unlikely in the foreseeable future.

“Union’s National Ratings are sensitive to a change in the bank’s creditworthiness relative to Nigerian peers,” the statement said.

Banking

GTCO’s N209bn Raise Sets Foundation for Accelerated Development—Agbaje

Published

2 days ago

10/01/2025

Adedapo Adesanya

By Adedapo Adesanya

Guaranty Trust Holding Company (GTCO) Plc recently completed the raising of N209 billion out of its targeted N400.5 billion public offer in the ongoing recapitalisation efforts directed by the Central Bank of Nigeria (CBN) to create resilient banks amid rising external shocks in the global environment.

Speaking on this development, the chief executive of the firm, Mr Segun Agbaje, said the equity capital raising has set a strong foundation for accelerated development.

“We extend our sincere appreciation to our new and existing shareholders, as well as the regulatory authorities, for their unwavering support during this initial phase of our equity capital raise.

“The strong participation and successful capital verification exercise and allotment process reaffirm the confidence investors have in our fundamentals and execution capabilities.

“This sets a solid foundation for accelerating our strategic roadmap, which aims to pivot the Group for transformational growth and unlock greater value across the Group’s Banking and Non-Banking businesses,” the banker stated.

GTCO had launched a public offer of 9.0 billion ordinary shares of 50 Kobo each at N44.5 per share, with N209.41 billion realized, representing 52.3 per cent of the total offer size.

The offer garnered substantial interest from domestic retail investors, raised a total of N209.41 billion from 130,617 valid applications for 4.706 billion ordinary shares, fully allotted.

“This milestone concludes the first phase of GTCO’s phased equity capital raise programme, which is structured on a balanced allocation strategy based on an equal split between institutional and retail investors. This balanced approach aligns with GTCO Plc’s commitment to fostering a well-diversified and robust investor base,” GTCO stated.

The announcement followed completion of the capital verification exercise conducted by the CBN and the approval of the basis of allotment of the offer by the Securities and Exchange Commission (SEC).

Banking

Fidelity Bank Donates Maternity Kits to Pregnant Women in Lagos

Published

2 days ago

10/01/2025

Modupe Gbadeyanka

By Modupe Gbadeyanka

No fewer than 30 pregnant women at the Mushin Primary Health Centre in Lagos have received maternity kits from Fidelity Bank Plc.

The gesture from the financial institution is part of its efforts to support improved maternal health in the metropolis.

It was gathered that the items were given to the beneficiaries through the Fidelity Helping Hands Programme (FHHP), a Corporate Social Responsibility (CSR) initiative of the lender aimed at promoting staff involvement in community development under the Great Minds Inductees Class.

“The project was borne out of the need to support pregnant women by providing them with essential materials for a safe delivery,” the Divisional Head for Brand and Communications Division at Fidelity Bank, Mr Meksley Nwagboh, explained.

“Maternal mortality remains a significant public health challenge in Nigeria, with the country accounting for a substantial proportion of global maternal deaths.

“In fact, a 2023 United Nations report indicate that nearly 28.5% of global maternal deaths occur in Nigeria.

“This is an alarming statistic and as a bank given to improving the welfare of our host communities, we deemed it fit to support initiatives to address this challenge in the Mushin community with this donation,” he stated.

One of the beneficiaries, Mrs Mary Olusanya, expressed her heartfelt appreciation for the bank’s support.

“I appreciate Fidelity Bank for helping us. Many pregnant women cannot afford these kits, but this donation ensures that we can have safe deliveries and better healthcare,” she said.

The Medical and Health Officer for Mushin Local Government Area, Dr Kayode Odufuwa, said, “This intervention by Fidelity Bank will help reduce maternal mortality and encourage more women from less-privileged backgrounds to register for antenatal care.”

“On behalf of the Chairman of Mushin LGA, Mr Emmanuel Bamgboye, we want to express our heartfelt gratitude to Fidelity Bank for extending its donation of maternity kits to pregnant women at this centre.

“We appeal for continued collaboration with the Bank to further strengthen healthcare services within the area,” he stated.

On her part, the Apex Nurse and Deputy Director of Nursing Services in Mushin LGA, Mrs Bolanle Odunlami, said, “The donation is a much-needed relief for many mothers who are unable to afford essential delivery kits. Fidelity Bank has truly shown empathy by coming to the aid of our patients, and for that, we are extremely grateful.”

Business Post reports that through the FHHP, employees of the bank identify projects that benefit their immediate community and gather funds to implement them.

The bank’s management then matches this contribution with an equivalent amount and allocates it for the chosen projects.

Banking

Plot to Remove Otedola as Chairman Won’t Affect Our Services—First Bank

Published

2 days ago

09/01/2025

Aduragbemi Omiyale

By Aduragbemi Omiyale

The management of First Bank of Nigeria (FBN) Holdings Plc has assured that the boardroom crisis rocking the company would not affect its operations.

Recall that a group of shareholders with 10 per cent equity stake in the financial institution asked for an Extra-ordinary General Meeting (EGM) under section 215 (1) of CAMA for the removal of the chairman of the board, Mr Femi Otedola, and a non-executive/deputy chief executive of Geregu Power Plc, Mr Julius Omodayo-Owotuga.

They argued that Mr Otedola, who owns Geregu Power, was plotting full control of FBN Holdings by planting his loyalists on the board.

The aggrieved shareholders pointed out that the businessman was planning to take charge of the proposed private placement of N360 billion shares of the firm, accusing him of removing those he felt were blocking his way.

To calm nerves, FBN Holdings issued a statement on Thursday, informing its stakeholders that the crisis does not pose a threat to its services.

“This matter does not in any way impact the operations of the company, and all the businesses within the Group continue to provide uninterrupted services to its customers.

“We assure our valued customers, shareholders, investors, other stakeholders and the general public that we are taking all necessary steps to protect the interests of the company and its subsidiaries.

“The Group’s performance continues to improve, resulting in a higher market capitalisation even as we work towards surpassing the regulatory minimum capital well ahead of the deadline.

“In the meantime, the Registrar and Lead Issuing House are collating the returns from all receiving agents in respect of the company’s rights issue which closed on December 30, 2024.

“FBN Holdings and its subsidiaries remain committed to the highest level of corporate governance,” the notice signed by its scribe, Mr Adewale Arogundade, said.