Banking

GCR Affirms AA-(NG) Rating on UBA With Stable Outlook

Published

6 years ago

11/11/2018

By Modupe Gbadeyanka

The national scale ratings of AA-(NG) and A1+(NG) in the long and short term respectively assigned to United Bank for Africa (UBA) have been affirmed by Global Credit Ratings (GCR).

The Nigeria-based rating agency, in a statement, disclosed that it also affirmed the long term international scale rating of B+ assigned to the lender with the outlook accorded as stable.

However, GCR stressed that downward ratings movement may emanate from a significant deterioration in asset quality, liquidity, capital and profitability metrics, noting that the international scale rating will be sensitive to changes in the sovereign rating of Nigeria.

In the statement, GCR explained that UBA’s ratings reflect its established franchise, significant domestic market share (being one of the top-tier banks in Nigeria) and status as a systemically important bank.

It added that further rating support was derived from the bank’s risk appropriate capitalisation, comfortable liquidity, as well as geographic and earnings diversification, with operations in 20 African countries and offices in three global financial centres (London, Paris and New York).

UBA’s capitalisation is considered satisfactory for the current risk level, with a risk weighted capital adequacy ratio of 20 percent and 18.4 percent at FY17 and 3Q FY18 respectively, above the regulatory minimum of 15 percent.

Supported by strong internal capital generation, shareholders’ funds grew consistently over the years and stood at N529.4 billion at FY17, representing a compounded annual growth rate of 22.5 percent over a five-year review period.

The gross non-performing loans (NPL) almost doubled (rising by 89.8 percent) to N114.8 billion at FY17, largely impacted by the downgrade of a single large exposure, underpinning the gross NPL ratio rise to 6.7 percent at FY17, from 3.9 percent at FY16.

According to management, remedial action on the loan has commenced and recovery prospects are considered high. Specific provision coverage of impaired loans stood at 22.0 percent at FY17 (FY16: 36.0 percent).

Consequently, capital value at risk (NPLs net of provisions to capital) was a higher 9.7 percent at FY17 (FY16: 1.9 percent). At 3Q FY18, the NPL ratio stood at 7.2 percent.

“Although the contractual and behavioural mismatch of assets and liabilities in FY17 reflected a liquidity gap of N1,631.7 billion and N712.7 billion respectively within the critical ‘less than one-month’ maturity bucket (equivalent to 3.1x and 1.3x of shareholders’ funds respectively), liquidity risk is mitigated through maintaining a sizeable portion of liquid assets.

“The bank’s liquidity profile is further supported by $500 million Eurobond facility raised during the year, as well as available credit lines from other financial institutions.

“UBA’s statutory liquidity ratio ranged between 33.8 percent and 55.5 percent in FY17, against the regulatory minimum of 30 percent,” the rating agency said.

In 2017 financial year, UBA reported a pre-tax profit of N105.3 billion, representing a 16.1 percent year-on-year growth. While net interest income was largely supported by improved investment yields and funding costs, non-interest income was driven by increase in transaction related income and foreign exchange gains.

Operating expenses rose by 23.7 percent on the back of increase in staff costs, IT and other administrative expenses, resulting in a cost to income ratio of 57.8 percent at FY17 (FY16: 56.3 percent).

Overall, the return on average equity and assets stood at 16.6 percent (FY16: 19.0 percent) and 2.1 percent (FY16: 2.3 percent) respectively in FY17.

In 3Q FY18, the bank delivered a pre-tax profit of N79.1 billion, comparing favourably with the corresponding period in FY17 and in line with budget on annualised basis.

Substantially improved asset quality, positive earnings profitability, and capitalisation metrics, as well as further enhancement of geographic and earnings diversification benefits, would be positively considered.

Banking

Banks Risk N150m Fine for Giving Hawkers New Naira Notes

Published

38 minutes ago

15/12/2024

Modupe Gbadeyanka

By Modupe Gbadeyanka

Any bank caught supplying minted Naira notes to currency hawkers will have to pay a fine of N150 million, the Central Bank of Nigeria (CBN) has warned.

In a circular issued over the weekend by the acting Director of Currency Operations Department of the central bank, Solaja Olayemi, it was stated that it was becoming embarrassing that new banknotes are hawked at social events when most Nigerians are unable to get cash from Automated Teller Machines (ATMs) of banks or over-the-counter.

The banking system has witnessed shortage of cash for a while, with most ATMs not dispensing cash to customers despite efforts by the regulator to address the situation.

In the notice, the CBN said the distribution of freshly minted Naira notes illegally to currency hawkers will attract a penalty of N150 million per branch involved.

The apex bank disclosed that to curb the illegal practice, it has ramped up enforcement measures, including spot checks at banking halls, ATMs, and mystery shopping at locations linked to currency hawking.

“Any erring deposit money banks or financial institutions that is culpable of facilitating, aiding or abetting, by direct actions or inactions, illicit flow of mint banknotes to currency hawkers and unscrupulous economic agents that commodify Naira banknotes, shall be penalised at first instance N150 million only, per erring branch and at later instances apply the full weight of relevant provisions of BOFIA 2020,” a part of the circular stated.

The notice stressed the importance of banks strengthening their internal controls, particularly in cash management at branches and during teller operations.

Banking

CBN Insists Old, New Naira Notes Remain Valid Beyond December 31

Published

1 day ago

14/12/2024

Aduragbemi Omiyale

By Aduragbemi Omiyale

The Central Bank of Nigeria (CBN) has reaffirmed that the old and new Naira notes will continue to be used for financial transactions in the country beyond December 31, 2024.

There had been rumours that the old and redesigned N200, N500, and N1,000 banknotes would no longer be legal tender from Wednesday, January 1, 2025, because the central bank would phase out the notes in compliance with a Supreme Court judgement of November 29, 2023.

But the apex bank, in a statement signed by its acting Director of Corporate Communications, Mrs Hakama Ali, on Friday, clarified that the apex court’s judgement being cited did not authorise the bank to phase out the banknotes by the end of this year.

According to her, the court allowed the CBN to leave the old and new notes to be used concurrently until it decides to gradually phase out the former.

The central bank’s spokesperson urged members of the public to disregard claims suggesting the old series of these denominations would cease to be valid at the end of this year.

She urged them to continue to accept all Naira notes for daily transactions, encouraging banks to also adopt alternative payment methods such as electronic channels to reduce the pressure on physical cash usage.

“The Central Bank of Nigeria (CBN) has observed the misinformation regarding the validity of the old N1000, N500, and N200 banknotes currently in circulation.

“In line with the bank’s previous clarifications and to offer further assurance, the CBN wishes to reiterate that the subsisting Supreme Court ruling granted on November 29, 2023, permits the concurrent circulation of all versions of the N1000, N500, and N200 denominations of the Naira indefinitely.

“For the avoidance of doubt, all versions of the naira, including the old and new designs of N1000, N500, and N200 denominations, as well as the commemorative and previous designs of the N100 denomination, remain valid and continue to be legal tender without any deadlines,” the statement noted.

Banking

Access Bank to Acquire 100% Equity in South Africa’s Bidvest

Published

3 days ago

12/12/2024

Adedapo Adesanya

By Adedapo Adesanya

Access Bank Plc, the banking subsidiary of Access Holdings Plc, has entered into a binding agreement with South African-based Bidvest Group Limited for the acquisition of 100 per cent equity stake in Bidvest Bank Limited.

The deal for the 24-year-old South African lender is due to be completed in the second half of 2025, upon regulatory approval.

This shows Access Bank’s further expansion plans in line with goals set by its late founder, Mr Herbert Wigwe.

The agreement to acquire 100 percent stake in Bidvest Bank reflects Access Bank’s commitment to strengthening its footprint in South Africa and consolidating on its position as the continent’s gateway to global markets as it seeks to optimise the benefits of recent acquisitions and accelerate its transition towards a greater focus on efficiencies.

Bidvest Bank, founded in 2000 is a niche and profitable South African financial institution providing a diverse range of services, including corporate and business banking solutions and diverse retail banking products.

As of its year ended June 2024, Bidvest Bank reported total assets equivalent of $665million and audited profit before tax of $20million.

Upon conclusion of this acquisition, Bidvest Bank will be merged with the bank’s existing South African subsidiary to create an enlarged platform to anchor the regional growth strategy for the SADC region.

This is coming just as the bank opened a new branch in Malta as part of efforts to focus on international trade finance after obtaining a banking licence from the European Central Bank (ECB) and the Malta Financial Services Authority (MFSA).

Access Bank said the licence marks a transformative milestone in bolstering Europe-Africa trade flows.

The Maltese branch was established by Access Bank UK Limited, the subsidiary of Access Bank Plc, which is also the subsidiary of Access Holdings Plc, which is listed on the Nigerian Exchange (NGX) Limited.