Banking
S&P Affirms UBA’s ‘B/B’ Ratings with Stable Outlook
By Modupe Gbadeyanka
Leading rating firm in the world, S&P Global Ratings, has announced affirming its ‘B/B’ and ‘ngBBB/ngA-2’ ratings on United Bank of Africa (UBA) Plc.
A statement issued by the rating agency on Monday disclosed that it believes the tier-1 lender in Nigeria will continue to maintain sound earnings and asset quality over the next 12 months, despite the sluggish economy in its operating environment a and the high economic risk in other parts of Africa where the bank operates.
Also in the statement, S&P affirmed its stable outlook on the financial institution, explaining that the “stable outlook reflects that on Nigeria and our expectation that the group’s financial profile will remain broadly stable in the next 12 months.”
In its earnings for third quarter of this year, the lender increased its profit after tax to N61 billion from N49.5 billion in Q3 of 2016, while its gross earnings closed at N334 billion compared with N265.5 billion 12 months ago.
S&P Global Ratings, in its statement yesterday, noted that it affirmed its long- and short-term Nigeria national scale ratings on UBA at ‘ngBBB/ngA-2’.
“The affirmation reflects our view that the group will maintain its top-tier competitive position in the Nigerian banking sector. UBA benefits from a good franchise in the corporate and retail segments in Nigeria and increasing geographic diversification. Overall, we think the group has an adequate business position.
“Furthermore, we believe that the group will display relatively stable asset quality and good earnings generation over the next 12 months.
“We assess the group’s capital and earnings as moderate under our risk-adjusted capital (RAC) framework. We estimate UBA’s RAC ratio (before adjustments for diversification) at 5.2% for year-end 2016. We project that the RAC ratio will remain broadly stable over the next 12 months on the back of the group’s good earning capacity and expected stable cost of risk.
“Our forecast assumptions include loan growth of around 20% (factoring in the expected depreciation of the Nigerian naira), stable interest margins, cost control, and moderate dividend distribution. On June 30, 2017, UBA’s capital adequacy ratio was 19.7%, which is well above the regulatory minimum of 15%, and we believe it will remain stable over the next 12 months.
“We assess UBA’s risk position as adequate, which reflects our expectation that the group will exhibit broadly stable asset quality in the next 12 months. The group’s cost of risk increased to 2.1% in 2016 compared with 0.5% in 2015, before declining to 1.2% at end-June 2017.
“This ratio compares well with the sector average. However, nonperforming loans (NPLs; loans overdue by 90 days or more) ratio increased to 4.2% at end-June from 3.9% at end-2016 (1.7% at year-end 2015) and was hit hard by the foreign currency shortages, which mainly affected the general commerce and oil and gas trading companies.
“The Central Bank of Nigeria allowed banks to write-off fully provisioned NPLs the same year, without prejudice to the prudential guideline that requires banks to retain fully provisioned NPLs for one year before write-off. This was aimed at avoiding accumulation of NPLs, since banks were expected to record additional provisions in the context of the naira devaluation in 2016. As a result, UBA’s NPL coverage by provisions dropped to 60.1% at end-June 2017 from 83.3% at end-2016, after reaching about 100% on Sept. 30, 2016.
“NPLs outside Nigeria accounted for 60% of the group’s total NPLs. We anticipate that credit losses will decline to about 1% in 2017-2018, while the NPL ratio will stabilize at around 4%-5% over the same period. Similar to other Nigerian banking groups, the UBA group extends loans in U.S. dollars (about 35% of total loans at end-2016), but this risk appears to be mitigated by receivables in the same foreign currency.
“We consider the group’s funding to be above average and its liquidity to be adequate, owing to its steady and relatively low-cost, retail-deposit-based funding profile. Similar to its Nigerian peers, UBA exhibits contractual asset-liability mismatches, including in foreign currency.
“Despite tightening monetary policy in Nigeria in 2016, the group maintained a stable cost of funding at about 3.6% as of end-June 2017. The group reported a net stable funding ratio of 143% as of the same date. Broad liquid assets covered short-term wholesale funding at about 4.5x as of the same date. UBA issued a $500 million Eurobond in May 2017. We understand that the group has sufficient U.S. dollar liquidity to meet its financial obligations in 2017.
“The stable outlook on UBA reflects that on Nigeria and our expectation that the group’s financial profile will remain broadly stable in the next 12 months.
“We would lower the ratings on UBA if we lowered the rating on Nigeria or observed a higher-than-expected deterioration in the group’s assets quality indicators over the next 12 months. We would also lower the ratings on UBA in the unlikely scenario of a significant drop in capitalization, leading to a RAC ratio (before adjustments for diversification) below 3%.
“An upgrade is unlikely in the next 12 months because it would hinge on an upgrade of the sovereign and a decline in the economic risks faced by the Nigerian banking sector or a significant strengthening of capitalization, as reflected by a RAC ratio (before adjustments for diversification) sustainably exceeding 7%,” the statement said.
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.
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.
By Modupe Gbadeyanka
To strengthen Europe-Africa trade ties, Access Bank has opened a new branch in Malta. It will focus on international trade finance, employing approximately 30 people in its initial phase, with plans for controlled expansion over time.
It was learned that this 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.
Access Bank Malta Limited commenced operations 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.
Malta, a renowned international financial centre, and a gateway between the two continents, is strategically positioned to play a pivotal role in advancing commerce and fostering economic partnerships.
This strategic expansion into Malta enables The Access Bank UK Limited to leverage growing trade opportunities between Europe and Africa.
It underscores the organisation’s commitment to driving global trade, financial integration, and supporting businesses across these regions.
“By establishing operations in Malta, we will gain a foothold in a market that bridges European and North African economies, moving us one step closer to our goal of becoming Africa’s Gateway to the World.
“It further enhances our bank’s capacity to support clients with innovative solutions tailored to cross-border trade and investment opportunities,” the chief executive of Access Bank, Mr Roosevelt Ogbonna, stated.
“Europe has emerged as Africa’s leading trading partner, driven by initiatives such as the Economic Partnership Agreements between the EU and African regions and the African Continental Free Trade Area (AfCFTA).
“With Europe-Africa economic relations entering a new phase, The Access Bank Malta Limited is ideally positioned to deepen trade and meet the financing and banking needs of our clients in these expanding markets,” the chief executive of Access Bank UK, Mr Jamie Simmonds, commented.
Also speaking, the chief executive of Access Bank Malta, Renald Theuma, said, “Malta is uniquely positioned as a bridge between Europe and Africa, making it an ideal location for our subsidiary. This move allows The Access Bank Malta Limited to engage more closely with customers in Europe and deliver tailored financial solutions that drive growth and connectivity across both continents.”
-
Feature/OPED5 years agoDavos was Different this year
-
Travel/Tourism8 years ago
Lagos Seals Western Lodge Hotel In Ikorodu
-
Showbiz2 years agoEstranged Lover Releases Videos of Empress Njamah Bathing
-
Banking6 years agoSort Codes of GTBank Branches in Nigeria
-
Economy2 years agoSubsidy Removal: CNG at N130 Per Litre Cheaper Than Petrol—IPMAN
-
Banking2 years agoFirst Bank Announces Planned Downtime
-
Sports2 years agoHighest Paid Nigerian Footballer – How Much Do Nigerian Footballers Earn
-
Technology4 years agoHow To Link Your MTN, Airtel, Glo, 9mobile Lines to NIN