Banking
Fitch Downgrades Union Bank’s National Rating to ‘BBB-(nga)’
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.
By Modupe Gbadeyanka
A partnership aimed to unlock diaspora capital for Nigeria’s growth has been deepened by the United Bank for Africa (UBA) Plc and the Nigerians in Diaspora Commission (NiDCOM).
The chief executive of UBA, Mr Oliver Alawuba, underscored the diaspora’s critical role as a powerful economic force and a generation of builders shaping new narratives for the continent.
He also reiterated the financial institution’s readiness to leverage its global network and innovative financial solutions to support diaspora engagement, urging Nigerians abroad to tap into opportunities within Africa’s economic landscape.
“You are not limited here; you have opportunities on the continent, and we want you to make good use of them. That is where banking, and we at UBA, become the connecting point that you need to access the opportunities back home.
“Whether you like it or not, the returns are high in Africa, and we are here to help you navigate that space,” the UBA chief said on Monday when he hosted key representatives of NiDCOM led by its chairman, Mrs Abike Dabiri, at the bank’s office in the United Kingdom.
UBA recently launched a Diaspora Banking platform to provide a seamless, integrated platform for Africans in the diaspora to bank, invest, and manage their financial obligations back home, thus connecting global Africans with investment and wealth opportunities.
The lender introduced the platform, with leading ecosystem partners representing a major step in redefining diaspora banking beyond remittances toward structured wealth creation and long-term investment.
“With UBA, you have a financial partner that is with you, that understands what you are going through, and that can support you to make sure you realise your aspirations, both here and in the country,” Mr Alawuba noted.
In her remarks, Mrs Dabiri-Erewa praised UBA for being a trusted financial partner over the years, especially with the recent launch of its diaspora platform.
“Many of you here are the real game-changers. “For years, it has been wonderful engaging Nigerians all over the world. When I started, it felt like we only heard the bad stories, not the good ones. What we have tried to do internationally is to tell and celebrate the good stories. We have Nigerians doing well all over the world, and they are in this room. We must continue to celebrate you,” she stated.
While remarking that the meeting demonstrates a significant step in aligning public and private sector efforts to deepen diaspora inclusion and accelerate Nigeria’s development agenda, she pledged closer collaboration in driving policies and initiatives that encourage Nigerians abroad to actively participate in the country’s economic growth.
By Modupe Gbadeyanka
The launch of the Enhanced Ecobank Ellevate Proposition (Ellevate 2.0) in Lagos has been welcomed by women entrepreneurs.
Ecobank Nigeria, a subsidiary of the pan‑African financial services group Ecobank Group, unveiled the upgraded programme at an event themed Her Voice. Her Power. Her Growth. The initiative was designed to support women‑owned businesses.
The gathering featured inspiring conversations and practical insights from accomplished women in business and professional leadership.
In her keynote address titled The True Woman Power: Strength Rooted in Identity, Resilience and Purpose, the founder of Gatimo Limited and Creative Director of Ruff ‘n’ Tumble, Mrs Adenike Ogunlesi, praised Ecobank for its longstanding support for women entrepreneurs.
“When I was seeking a loan facility many years ago to grow my business, Ecobank was the institution that supported me when others turned me down,” she shared, encouraging women to embrace self-awareness, resilience, and purpose as the drivers of long‑term success.
The panel session featured the chief executive of Strata Advisory, Ms Bode Abifarin; the chief executive of Village Farms Commerce and Exchange, Ms Titilayo Adesoga; and the founder of Beaty Hut Africa, Ms Subuola Oyeleye, who each shared powerful reflections from their personal and professional journeys.
Drawing from her extensive leadership background, Ms Abifarin highlighted the need for women to own their transitions and step confidently into new seasons.
On her part, Ms Adesoga encouraged women to rise above limitations by taking ownership of their personal and business narratives, as Ms Oyeleye highlighted the importance of authenticity, innovation, and investing in quality, reinforcing that women can build globally competitive businesses from Nigeria.
In her welcome speech, the Head of Premier Banking and Wealth Management at Ecobank Nigeria, Ms Ayo Osolake, who represented the Managing Director/Regional Executive, Mr Bolaji Lawal, said, “Ellevate by Ecobank reflects our unwavering commitment to supporting women entrepreneurs, who remain key drivers of economic growth, innovation, and job creation.”
Ellevate Manager for Ecobank Nigeria, Ms Victoria Igun, said, “This enhanced proposition creates stronger pathways for women entrepreneurs and professionals to build sustainable businesses and translate ambition into lasting impact.”
By Adedapo Adesanya
Nigerian tier-1 lender, Zenith Bank Plc, plans to list on the London Stock Exchange in 2027 to broaden access to capital and strengthen client services.
“There are a lot of deals we have on the table to finance across the United Kingdom and other countries, for which we need to raise more capital,” a bank official said on Tuesday, as per Bloomberg, since Zenith didn’t disclose additional details of its plan.
The move will make Zenith Bank the second Nigerian lender to list on the United Kingdom’s major exchange, following Guaranty Trust Holding Company (GTCO) Plc.
Zenith Bank, which is Nigeria’s second-largest lender by market value, has opened a branch in Manchester today in addition to the operation it already has in London.
The Manchester branch has the capacity to create up to 30 new direct jobs, a boost for the economy of the UK’s North West region.
The chief executive of Zenith Bank, Ms Adaora Umeoji, said, “The United Kingdom remains a key global financial centre. The opening of Zenith Bank, Manchester, therefore, marks another important milestone in our international expansion strategy, enabling us to deepen relationships with our customers, support trade and investments, and connect businesses between Africa and the UK more effectively.”
Last year, the bank raised its capital above the N500 billion minimum requirement set by the Central Bank of Nigeria (CBN), and announced plans to expand in francophone West Africa.
Founded in 1990 by Mr Jim Ovia, Zenith Bank has grown into one of Africa’s most respected banking institutions, boasting a robust capital base and a remarkable history of year-on-year profitability.
Headquartered in Lagos, Nigeria, Zenith Bank operates over 500 branches and business offices across the 36 States of the Federation and the Federal Capital Territory (FCT).
The bank currently operates subsidiaries in several African countries, including Ghana, Sierra Leone, Gambia, and Cote d’Ivoire, while maintaining a presence in major international financial centres, including the United Kingdom, France, the UAE and China.
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