Moody''s Downgrades Eight Nigerian Banks Following Downgrade of Nigeria''s Government Bond Rating

Monday, November 13, 2017 5:39PM / Moody’s Investors Service 

The affirmations reflect (1) the bank's resilient asset quality profile, which is more geographically diversified than most of its peers and (2) then bank's predominantly deposit funded balance sheet, which is supported by a solid pan-African franchise.

 

The downgrades are primarily driven by Moody's view that the government's capacity to provide support for Nigerian banks in times of stress has weakened as indicated by Moody's recent downgrade of Nigeria's government bond ratings to B2 stable from B1 stable. The decision to downgrade the long term foreign currency deposit rating to B3 and the foreign currency national scale ratings to A3.ng/NG-2, follows the downgrade of the relevant country ceiling, which captures foreign currency and convertibility risks. The downgrade of the local currency deposit NSR is a result of the repositioning of our relative ranking of Nigerian banks within our NSR map following the downgrade of the corresponding local currency deposit global scale rating.

 

Zenith Bank Plc

Moody's has today downgraded Zenith's BCA and adjusted BCA to b2 from b1, long-term local currency deposit rating to B2 from B1, long term foreign currency deposit rating to B3 from B2, long-term local and foreign currency issuer ratings to B2 from B1, long term local currency national scale deposit ratings to Aa3.ng from Aaa.ng, foreign currency national scale deposit ratings to A3.ng/NG-2 from Aa3.ng/NG-1, long-term CR Assessment to B1(cr) from Ba3(cr). The Aa3.ng/NG-1 local currency deposit NSR now represents the highest attainable NSR rating in Nigeria. The global scale short-term deposit and issuer ratings were affirmed at Not-Prime. The outlook on all long-term deposit and issuer ratings remains stable.

 

The downgrades are primarily driven by the bank's high exposure to government securities that links the bank's credit profile to that of the government. The decision to downgrade the long term foreign currency deposit rating to B3 and the foreign currency national scale ratings to A3.ng/NG-2, follows the downgrade of the relevant country ceiling, which captures foreign currency and convertibility risks. The downgrade of the local currency deposit NSR is a result of the repositioning of our relative ranking of Nigerian banks within our NSR map following the downgrade of the corresponding local currency deposit global scale rating.

 

Zenith's ratings reflect (1) the bank's resilient earnings generating capacity and robust capital buffers, which together provide a cushion to withstand asset quality deterioration, (2) the bank's high liquidity buffers and a predominantly deposit funded balance sheet, and (3) the bank's robust franchise, which allows it to attract inexpensive deposits and to lend to high credit quality borrowers (relative to other Nigerian banks), resulting in relatively strong asset quality metrics and low credit costs.

 

Bank of Industry

Moody's has today downgraded Bank of Industry's long-term local and foreign currency issuer ratings to B2 from B1 and its long term local and foreign currency national scale issuer ratings to Aa3.ng from Aa1.ng. The Aa3.ng/NG-1 national scale issuer rating now represents the highest attainable national scale rating (NSR) in Nigeria. All global scale short-term issuer ratings were affirmed at Not-Prime. The outlook on all long-term issuer ratings remains stable.

 

Bank of Industry's b2 standalone profile remains unchanged and reflects (1) its robust capital buffers, with an equity to assets ratio of 34.0% as of June 2017, (2) a stable liability structure made up of long-term funding at concessional rates and (3) the tangible improvements to the bank's risk positioning in recent years. These strengths are balanced against (4) our expectation that asset quality will be increasingly pressured given then bank's higher risk exposure to the micro, small and medium-sized enterprises (MSMEs) segment, which exposes it to riskier assets.

 

The downgrades are primarily driven by Moody's view that the government's capacity to provide support for Nigerian banks in times of stress has weakened as indicated by Moody's recent downgrade of Nigeria's government bond ratings to B2 stable from B1 stable. The downgrade of the NSR is a result of the repositioning of the bank's rating within our NSR map following the aforementioned downgrades of the corresponding global scale ratings.

 

What Could Move Ratings Up or Down

A demonstrated ability to contain non-performing loans while maintaining solid core profitability and capital generation could put upward pressure on the banks' BCAs or lead to a stabilisation in the outlook in the case of FBN. An upgrade of the banks' global scale deposit and issuer ratings would be contingent on an improvement in the operating environment that translates to an upgrade of Nigeria's sovereign rating.

The ratings could be downgraded in the event of a further downgrade of the sovereign and/or if we assess that the government's willingness to provide support in the future will decline below our current assumptions. The ratings could also be downgraded if we anticipate that a deterioration in the macro environment poses downside risks for asset quality and/or the capital generation capacity of the banks beyond what is already assumed in the ratings.

 

List of Affected Ratings

Issuer: Access Bank Plc

Downgrades:

....LT Issuer Rating, Downgraded to B2 from B1, Outlook Remains Stable

....LT Bank Deposits (Local Currency), Downgraded to B2 from B1, Outlook Remains Stable

....LT Bank Deposits (Foreign Currency), Downgraded to B3 from B2, Outlook Remains Stable

....NSR LT Bank Deposits (Local Currency), Downgraded to A1.ng from Aa2.ng

....NSR LT Bank Deposits (Foreign Currency), Downgraded to A3.ng from Aa3.ng

....NSR ST Bank Deposits (Foreign Currency), Downgraded to NG-2 from NG-1

Affirmations:

....ST Issuer Rating, Affirmed NP

....ST Bank Deposits, Affirmed NP

....NSR ST Bank Deposits (Local Currency), Affirmed NG-1

....Adjusted Baseline Credit Assessment, Affirmed b2

....Baseline Credit Assessment, Affirmed b2

....LT Counterparty Risk Assessment, Affirmed B1(cr)

....ST Counterparty Risk Assessment, Affirmed NP(cr)

Outlook Actions:

....Outlook, Remains Stable

 

Issuer: Bank of Industry

Downgrades:

....LT Issuer Rating, Downgraded to B2 from B1, Outlook Remains Stable

....NSR LT Issuer Rating, Downgraded to Aa3.ng from Aa1.ng

Affirmations:

....ST Issuer Rating, Affirmed NP

....NSR ST Issuer Rating, Affirmed NG-1

Outlook Actions:

....Outlook, Remains Stable

 

Issuer: First Bank of Nigeria Limited

Downgrades:

....LT Bank Deposits (Foreign Currency), Downgraded to B3 from B2

....NSR LT Bank Deposits (Foreign Currency), Downgraded to A3.ng from A2.ng

....NSR ST Bank Deposits (Foreign Currency), Downgraded to NG-2 from NG-1

....LT Counterparty Risk Assessment, Downgraded to B2(cr) from B1(cr)

Affirmations:

....LT Issuer Rating, Affirmed B2, Outlook Remains Negative

....ST Issuer Rating, Affirmed NP

....LT Bank Deposits (Local Currency), Affirmed B2, Outlook Remains Negative

....ST Bank Deposits, Affirmed NP

....NSR LT Bank Deposits (Local Currency), Affirmed A2.ng

....NSR ST Bank Deposits (Local Currency), Affirmed NG-1

....Adjusted Baseline Credit Assessment, Affirmed b3

....Baseline Credit Assessment, Affirmed b3

....ST Counterparty Risk Assessment, Affirmed NP(cr)

Outlook Actions:

....Outlook, Remains Negative

 

Issuer: Guaranty Trust Bank Plc

Downgrades:

....LT Issuer Rating, Downgraded to B2 from B1, Outlook Remains Stable

....LT Bank Deposits (Local Currency), Downgraded to B2 from B1, Outlook Remains Stable

....LT Bank Deposits (Foreign Currency), Downgraded to B3 from B2, Outlook Remains Stable

....NSR LT Bank Deposits (Local Currency), Downgraded to Aa3.ng from Aa1.ng

....NSR LT Bank Deposits (Foreign Currency), Downgraded to A3.ng from Aa3.ng

....NSR ST Bank Deposits (Foreign Currency), Downgraded to NG-2 from NG-1

....Adjusted Baseline Credit Assessment, Downgraded to b2 from b1

....Baseline Credit Assessment, Downgraded to b2 from b1

....LT Counterparty Risk Assessment, Downgraded to B1(cr) from Ba3(cr)

Affirmations:

....ST Issuer Rating, Affirmed NP

....ST Bank Deposits, Affirmed NP

....NSR ST Bank Deposits (Local Currency), Affirmed NG-1

....ST Counterparty Risk Assessment, Affirmed NP(cr)

Outlook Actions:

....Outlook, Remains Stable

 

Issuer: Sterling Bank Plc

Downgrades:

....LT Bank Deposits (Foreign Currency), Downgraded to B3 from B2, Outlook Remains Stable

....NSR LT Bank Deposits (Local Currency), Downgraded to A2.ng from A1.ng

....NSR LT Bank Deposits (Foreign Currency), Downgraded to A3.ng from A2.ng

....NSR ST Bank Deposits (Foreign Currency), Downgraded to NG-2 from NG-1

....LT Counterparty Risk Assessment, Downgraded to B2(cr) from B1(cr)

Affirmations:

....LT Issuer Rating, Affirmed B2, Outlook Remains Stable

....ST Issuer Rating, Affirmed NP

....LT Bank Deposits (Local Currency), Affirmed B2, Outlook Remains Stable

....ST Bank Deposits, Affirmed NP

....NSR ST Bank Deposits (Local Currency), Affirmed NG-1

....Adjusted Baseline Credit Assessment, Affirmed b3

....Baseline Credit Assessment, Affirmed b3

....ST Counterparty Risk Assessment, Affirmed NP(cr)

Outlook Actions:

....Outlook, Remains Stable

 

Issuer: Union Bank of Nigeria plc

Downgrades:

....LT Bank Deposits (Foreign Currency), Downgraded to B3 from B2, Outlook Remains Stable

....NSR LT Bank Deposits (Local Currency), Downgraded to A2.ng from Aa3.ng

....NSR LT Bank Deposits (Foreign Currency), Downgraded to A3.ng from A1.ng

....NSR ST Bank Deposits (Foreign Currency), Downgraded to NG-2 from NG-1

....LT Counterparty Risk Assessment, Downgraded to B2(cr) from B1(cr)

Affirmations:

....LT Issuer Rating, Affirmed B2, Outlook Remains Stable

....ST Issuer Rating, Affirmed NP

....LT Bank Deposits (Local Currency), Affirmed B2, Outlook Remains Stable

....ST Bank Deposits, Affirmed NP

....NSR ST Bank Deposits (Local Currency), Affirmed NG-1

....Adjusted Baseline Credit Assessment, Affirmed b3

....Baseline Credit Assessment, Affirmed b3

....ST Counterparty Risk Assessment, Affirmed NP(cr)

Outlook Actions:

....Outlook, Remains Stable

 

Issuer: United Bank for Africa Plc

Downgrades:

....LT Issuer Rating, Downgraded to B2 from B1, Outlook Remains Stable

....LT Bank Deposits (Local Currency), Downgraded to B2 from B1, Outlook Remains Stable

....LT Bank Deposits (Foreign Currency), Downgraded to B3 from B2, Outlook Remains Stable

....NSR LT Bank Deposits (Local Currency), Downgraded to A1.ng from Aa2.ng

....NSR LT Bank Deposits (Foreign Currency), Downgraded to A3.ng from Aa3.ng

....NSR ST Bank Deposits (Foreign Currency), Downgraded to NG-2 from NG-1

....Senior Unsecured Regular Bond/Debenture, Downgraded to B2 from B1, Outlook Remains Stable

Affirmations:

....ST Issuer Rating, Affirmed NP

....ST Bank Deposits, Affirmed NP

....NSR ST Bank Deposits (Local Currency), Affirmed NG-1

....Adjusted Baseline Credit Assessment, Affirmed b2

....Baseline Credit Assessment, Affirmed b2

....LT Counterparty Risk Assessment, Affirmed B1(cr)

....ST Counterparty Risk Assessment, Affirmed NP(cr)

Outlook Actions:

....Outlook, Remains Stable

 

Issuer: Zenith Bank Plc

Downgrades:

....LT Issuer Rating, Downgraded to B2 from B1, Outlook Remains Stable

....LT Bank Deposits (Local Currency), Downgraded to B2 from B1, Outlook Remains Stable

....LT Bank Deposits (Foreign Currency), Downgraded to B3 from B2, Outlook Remains Stable

....NSR LT Bank Deposits (Local Currency), Downgraded to Aa3.ng from Aaa.ng

....NSR LT Bank Deposits (Foreign Currency), Downgraded to A3.ng from Aa3.ng

....NSR ST Bank Deposits (Foreign Currency), Downgraded to NG-2 from NG-1

....Senior Unsecured Regular Bond/Debenture, Downgraded to B2 from B1, Outlook Remains Stable

....Senior Unsecured MTN Program, Downgraded to (P)B2 from (P)B1

....Adjusted Baseline Credit Assessment, Downgraded to b2 from b1

....Baseline Credit Assessment, Downgraded to b2 from b1

....LT Counterparty Risk Assessment, Downgraded to B1(cr) from Ba3(cr)

Affirmations:

....ST Issuer Rating, Affirmed NP

....ST Bank Deposits, Affirmed NP

....NSR ST Bank Deposits (Local Currency), Affirmed NG-1

....ST Counterparty Risk Assessment, Affirmed NP(cr)

Outlook Actions:

....Outlook, Remains Stable

 

Principal Methodologies

The principal methodology used in Access Bank Plc, First Bank of Nigeria Limited, Guaranty Trust Bank Plc, Sterling Bank Plc, Union Bank of Nigeria plc, United Bank for Africa Plc and Zenith Bank Plc ratings was Banks published in September 2017.

The principal methodologies used in Bank of Industry ratings were Finance Companies published in December 2016, and Government-Related Issuers published in August 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

 

Moody's National Scale Credit Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale credit ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".za" for South Africa. For further information on Moody's approach to national scale credit ratings, please refer to Moody's Credit rating Methodology published in May 2016 entitled "Mapping National Scale Ratings from Global Scale Ratings".

 

While NSRs have no inherent absolute meaning in terms of default risk or expected loss, a historical probability of default consistent with a given NSR can be inferred from the GSR to which it maps back at that particular point in time. For information on the historical default rates associated with different global scale rating categories over different investment horizons, please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1060333.

 

Regulatory Disclosures

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating.

 

For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

 

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

 

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

 

Items color coded in purple in this Press Release relate to unsolicited ratings for a rated entity which is non-participating.

 

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued the ratings.

 

The relevant office for each credit rating is identified in "Debt/deal box" on the Ratings tab in the Debt/Deal List section of each issuer/entity page of the website. 

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