Fitch Lowers Outlook on 4 Nigerian Banks to Negative

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By Modupe Gbadeyanka

The outlooks on the Long-Term Issuer Default Ratings (IDR) of four Nigerian banks have been revised to negative from stable by Fitch Ratings following the downgrading of the country’s economy by the agency nearly two weeks ago.

Fitch said the affected financial institutions are Zenith Bank, Guaranty Trust Bank (GTBank), United Bank for Africa (UBA) and the Bank of Industry Limited (BOI).

The first three are listed on the Nigeria Stock Exchange (NSE). They are the highest-rated commercial banks in the country, with their ratings driven by their standalone creditworthiness, as defined by their respective Viability Ratings (VRs).

Fitch said the VRs are capped by the Nigerian sovereign (B+/Negative) rating, given the concentration of their activities within Nigeria, including lending to the real-economy sector, and their linkage to the sovereign credit profile through significant exposure to government securities.

In a statement issued last week, Fitch said it expects the banks’ credit profiles to be negatively affected in the event of a sovereign downgrade, particularly if this is accompanied by sharp Naira devaluation.

“In this event, our assessment is that capital and, potentially, asset-quality metrics would be negatively impacted. Accordingly, Fitch has revised the outlook on the Long-Term IDRs of these three banks to negative,” it said.

BOI is a state-owned development bank and its Long-Term IDR is equalised with the Nigerian sovereign rating and driven by its Support Rating Floor (SRF) of ‘B+’, which reflects a limited probability of support from the state if required.

“The Negative Outlook on BOI mirrors that on the Nigerian sovereign. Our view of support considers BOI’s 99.9 percent state ownership, policy role and strategic importance to Nigeria’s economic and industrial development,” the report said.

The rating agency said given that its assessment of sovereign support remains unchanged, it has affirmed the Support Ratings and Support Rating Floors of Zenith Bank, GTBank, UBA and BOI.

It announced affirming the ‘AAA(nga)’ National Ratings of Stanbic IBTC Holdings PLC and Stanbic IBTC Bank PLC.

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