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Sunday, December 29, 2019 05:02AM / by
Fitch Ratings/ Header Image Credit: EcoGraphics
Fitch
Ratings has revised the Outlooks on the Long-Term Issuer Default Ratings (IDR)
of four Nigerian banks, Zenith Bank
plc (Zenith), Guaranty
Trust Bank plc (GTB), United Bank for
Africa plc (UBA) and Bank of Industry Limited (BOI), to Negative from
Stable and affirmed their IDRs at 'B+'. The agency has also affirmed the
'AAA(nga)' National Ratings of Stanbic IBTC
Holdings PLC and Stanbic IBTC Bank PLC.
The
rating actions follow the revision
of the Outlook on Nigeria's Long-Term IDRs to Negative from Stable on 19
December 2019.
Key Rating
Drivers
IDRs, VRs,
Senior Debt Ratings
Zenith, GTB
and UBA are the highest-rated commercial banks in Nigeria (on the international
scale). The ratings are driven by their standalone creditworthiness, as defined
by their respective Viability Ratings (VRs). In Fitch's view, the VRs are
capped by the Nigerian sovereign (B+/Negative) rating, given the concentration
of the banks' activities within Nigeria, including lending to the real-economy
sector, and the banks' linkage to the sovereign credit profile through significant
exposure to government securities.
Fitch expects
the banks' credit profiles to be negatively affected in the event of a
sovereign downgrade, particularly if this is accompanied by sharp naira
devaluation. In this event, our assessment is that capital and, potentially,
asset-quality metrics would be negatively impacted. Accordingly, Fitch has
revised the Outlook on the Long-Term IDRs of these three banks to Negative.
BOI is a
state-owned development bank and its Long-Term IDR is equalised with the
Nigerian sovereign rating and driven by its Support Rating Floor (SRF) of 'B+',
which reflects a limited probability of support from the state if required. The
Negative Outlook on BOI mirrors that on the Nigerian sovereign. Our view of
support considers BOI's 99.9% state ownership, policy role and strategic
importance to Nigeria's economic and industrial development.
Support
Ratings And Support Rating Floors
We have
affirmed the Support Ratings and Support Rating Floors of Zenith, GTB, UBA and
BOI given that our assessment of sovereign support remains unchanged.
National
Ratings
The National
Ratings reflect the issuers' creditworthiness relative to other Nigerian
issuers. The National Ratings of all banks have been affirmed, given that their
creditworthiness relative to other issuers in Nigeria is not expected to change
as a result of the rating action on the Nigerian sovereign.
Rating
Sensitivities
The Negative
Outlook on Zenith, GTB, UBA and BOI reflects our view that a sovereign
downgrade would likely be accompanied by a downgrade of these issuers'
Long-Term IDRs. The ratings of Zenith, GTB and UBA are also sensitive to
deterioration in operating environment and its impacts on asset quality and
capitalisation.
BOI's IDRs,
Support Rating and SRF are sensitive to changes in Nigeria's sovereign ratings.
The bank's ratings are also sensitive to a reduced propensity of the
authorities to support the bank but this is not our base case.
The National
Ratings are sensitive to a change in Fitch's opinion of the banks'
creditworthiness relative to other issuers in Nigeria.
Public
Ratings With Credit Linkage To Other Ratings
BOI's IDRs
are a equalised with Nigeria's sovereign ratings and move in tandem with the
latter.
Stanbic IBTC
Holdings PLC's and Stanbic IBTC Bank PLC's National Ratings are driven by
potential support from ultimate parent, Standard Bank Group.
ESG
Considerations
The highest level of environmental, social and governance (ESG) credit relevance for BOI, GTB, UBA and Zenith, is a score of 3. This means ESG issues are credit-neutral or have only a minimal impact on the entities, either due to their nature of to the way in which they are being managed by the entities.
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