GCR Affirms Rating on UBA’s N345b Series 1 Notes

By Modupe Gbadeyanka

Global Credit Ratings has affirmed the national scale long term credit ratings of A(NG) accorded to Series 1 Notes issued under United Bank for Africa Plc’s N345 billion Medium Term Note Programme

A statement issued by the local rating agency disclosed that the rating was accorded with stable outlook and is valid until September 2019.

It was disclosed that the accorded rating is supported by UBA’s established franchise, significant domestic market share (being one of the top-tier banks in Nigeria) and status as a systemically important bank.

Further rating support is 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), GCR said.

While UBA registered a 20.6 percent growth in total operating income to N326.6 billion in FY17, performance at the pre-tax level was constrained by increase in impairment charge and operating expenses (which rose by 18.8 percent and 23.7 percent respectively).

Thus, the lender recorded a pre-tax profit of N105.3 billion for the year, translating to a 16.1 percent year-on-year growth.

A pre-tax profit of N79.1 billion was recorded for the nine-month period ended September 30, 2018, indicating that performance was in line with budget on annualised basis.

Liquidity risk has been mitigated through maintaining of 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.

According to the quarterly performance reports provided by the Trustees to the Noteholders on the Series 1 Notes, the Issuer has been meeting its obligations under the Issuances on a timely basis, up to the most recent coupon payment date (June 30, 2018).

“Cognisance was taken of the nature of the Series’ Notes as unsecured and subordinated obligations of the Issuer, ranking after all senior indebtedness and the claims of depositors of the bank. As such, the accorded rating is two notches lower than UBA’s national scale long-term rating of AA-(NG), with a Stable outlook,” GCR said in the statement.

It added that timely payment of the obligations under this Issuance is dependent on the performance of the Issuer.

“Hence, the accorded rating would be sensitive to a positive rating action on the Issuer. Non-compliance with the set covenants, as well as a negative rating action on the Issuer could trigger a negative rating action on the Notes,” it said.