Reviews & Outlooks | |
Reviews & Outlooks | |
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Friday, May
01, 2020 / 11:05 AM / Fitch ratings / Header Image
Credit: Ecographics
Fitch Ratings has revised Guaranty
Trust Bank Plc's (GTB) and Zenith Bank
Plc's National Long-Term Ratings to 'AA(nga)' and 'AA-(nga)', respectively. We
have also revised their National Short-Term Ratings to 'F1+(nga)' from
'F1(nga)'.
The rating actions follow the recalibration of the
Nigerian National Ratings Scale following the downgrade of the sovereign on 6
April 2020. Rating revisions are used to modify ratings for reasons that are
not related to changes in credit quality.
Related Link: Fitch Downgrades
Nigeria to 'B'; Outlook Negative
National scale ratings are a risk ranking of issuers
in a particular market designed to help local investors differentiate risk.
Nigeria's national scale ratings are denoted by the unique identifier '(nga)'.
National scales ratings are not comparable to Fitch's international scales
ratings or to other countries' national scale ratings.
Key Rating Drivers
The recalibration of the Nigerian national rating
scale has resulted in the upward revision of the National Long- and Short-Term
Ratings of GTB
and Zenith.
The differentiation between the National Long-term Ratings of GTB and Zenith is
made possible by greater granularity under the recalibrated Nigerian national
rating scale, which allows us to differentiate further between the National
Ratings of Nigerian issuers.
The Rating Watch Negative (RWN) on the National
Long-Term Ratings, and debt ratings where relevant, reflects our expectation
that all Nigerian banks will face material pressures from a weaker operating
environment over the next few months given the oil price crash, potential
further devaluation of the Nigerian naira and the impact of the COVID-19 pandemic
on individuals and businesses.
Rating Sensitivities
The National Ratings of the two banks are sensitive to
a change in their creditworthiness relative to other Nigerian issuers.
Factors that could, individually or collectively, lead
to positive rating action/upgrade:
Downside risk will arise from a weakening in the
banks' standalone credit profiles, especially if there is sustained material
deterioration in asset quality, profitability and capital metrics. Nigerian
banks face very challenging conditions due to pressures in the domestic
operating environment. Downside risks are heightened by the coronavirus
outbreak especially if periods of lockdown, oil price weakness and global
economic turmoil extend into 2H20, giving rise to more severe economic and
financial market fallout.
Factors that could, individually or collectively, lead
to negative rating action/downgrade:
Upside to the ratings is unlikely at present.
Best/Worst Case Rating
Scenario
International scale credit ratings of Financial Institutions
issuers have a best-case rating upgrade scenario (defined as the 99th
percentile of rating transitions, measured in a positive direction) of three
notches over a three-year rating horizon; and a worst-case rating downgrade
scenario (defined as the 99th percentile of rating transitions, measured in a
negative direction) of four notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on
historical performance.
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