Fitch, the London based global rating agency has upgraded its “Individual Rating” of Union Bank of Nigeria Plc from “F” in December 2009 to “E” in its current Nigeria credit analysis, describing the Bank’s outlook as stable with affirmed “B+” long-term IDR.The rating agency, which announced the upgrade yesterday, also affirmed its other ratings on the bank.
Giving the full rating breakdown on Union Bank, Fitch said its upgrade of the Individual Rating of the bank reflects the Central Bank of Nigeria's (CBN’s) on-going support and regulatory forbearance for Union Bank following the bank's failure in August 2009. It also said the Rating was based on the level of support that the bank would receive from the CBN, if required.
It stated however, that while Fitch believes there is a strong willingness from the authorities to provide support in case of need, the ability is constrained by Nigeria's Long-term foreign currency Issuer Default Rating (IDR) of 'BB-'. In December, 2009 the Agency had issued the Bank with a “B+” in its “Issuer Default Ratings (IDR) and Support Rating Floor, indicating the level of support the Bank would receive from the sovereign by the virtue of Union Bank’s well established domestic franchise. Financial analysts explained that Fitch individual rating reflects a bank’s standalone risk and the IDR the prospect of external support.
The Agency acknowledged the pedigree of Union Bank as one of Nigeria's largest banks by total assets, and with strong domestic franchise since it was established in 1917. Following the management dexterity of the new leadership of the bank, it has been able to surmount most of the challenges it faced after it was found in “grave situation’ by the joint examination of the central bank of Nigeria and the Nigerian deposit insurance corporation.The bank declared a profit before tax of N12.1 billion for the half year ended June 30, 2010. That tripled the growth on its profit when compared to N3.56 billion performance in the first quarter of this year.
According to the result, other performance indicators of the bank were equally impressive as gross earnings rose to N66.9 billion, representing 100 per cent increase over N34.235 billion that was recorded in the first quarter, 2010.The management of the bank has assured that with the support of the board, it is expected that the trend will continue for the rest of the financial year ended December 31, 2010.Compared to the corresponding period of 2009, Union Bank's interest expense dropped from N28.7 billion to N21 billion in half year, 2010 and operating expenses from N38.3 billion to N37.3 billion.
Analysts said the improvement in the relevant ratios of the bank, showed it has regained massive customer confidence. Its deposit liabilities rose to N858 billion; comparing favourably to the N866 billion that was the deposit position of the bank before CBN's intervention on August 14, 2009.
The Group Managing Director and Chief Executive, Mrs Funke Osibodu, assured recently that the management is committed to the clean up of the books of the bank and reposition it as Nigeria's dominant bank.