Moody's Affirms Bank of Industry Ratings, Changes Outlook to Negative from Stable

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Friday, December 03, 2021 / 10:15 AM / by Moody's Investors Service  / Header Image Credit: Bank of Industry

 

Moody's Investors Service ("Moody's") has today affirmed Bank of Industry's (BoI) B2 corporate family rating (CFR) and long-term issuer ratings, and changed the issuer outlook to stable from negative.

 

The rating action follows the rating agency's decision on 29 November 2021 to affirm the Government of Nigeria's B2 ratings and change the outlook to stable from negative.

 

Related Link: Moody's Changes Nigeria's Outlook to Stable, Affirms B2 Ratings - Dec o2, 2021

 

Ratings Rationale

 

-- Issuer Ratings Affirmed

 

The affirmation of Bank of Industry's B2 CFR takes into consideration its (a) strong asset quality metrics, with the majority of the loan book secured against bank guarantees and federal government bonds; (b) robust capital buffers; and (c) a gradually broadening and diversifying funding structure. Bank of Industry's tangible common equity-to tangible managed assets ratio stood at a strong 18% as of December 2020. The bank's problem loans to gross loans ratio was 2.6% as of December 2020, which compares favourably to the 6.8% systemwide average for Nigerian banks as of September 2020.

 

The rating agency also notes, however, that Bank of Industry's ratings are effectively constrained at the level of Nigeria's sovereign rating, primarily because of the high interlinks between the credit profile of Bank of Industry and that of the government. The latter reflects the fact that Bank of Industry is a development finance institution exclusively operating in Nigeria and over 45% of total assets were invested in Central Bank of Nigeria (CBN) open market operations (OMO) bills as of December 2020.

 

-- Outlook Changed To Stable

 

Moody's decision to change Bank of Industry's outlook to stable from negative is driven by the change in the sovereign rating outlook to stable, and reflects the fact that its ratings are effectively constrained at the level of Nigeria's sovereign ratings.

 

Moody's also expects BoI to benefit from improving economic outcomes in Nigeria that are supported by high oil prices. The rating agency expects GDP growth of 2.8% in 2021 and 3.5% per year on average until 2025, which, while remaining insufficient to materially improve wealth levels, will likely produce development opportunities for BoI.

 

Factors That Could Lead To An Upgrade Or Downgrade Of The Ratings

 

Upwards pressure on Bank of Industry's issuer ratings could develop from a material strengthening of the firm's operating environment and in the government's credit profile and ratings.

 

Downward pressure on Bank of Industry's issuer ratings could develop from a deterioration in the sovereign's credit profile, as would be indicated by a downgrade in the sovereign rating; and/or a significant deterioration in its capitalisation and asset quality metrics.

 

List Of Affected Ratings

 

..Issuer: Bank of Industry

 

Affirmations:

 

....Short-term Issuer Ratings, Affirmed NP

 

....Long-term Issuer Ratings, Affirmed B2

 

....NSR Short-term Issuer Ratings, Affirmed NG-1

 

....NSR Long-term Issuer Ratings, Affirmed Aa3.ng

 

....Long-term Corporate Family Rating, Affirmed B2

 

....Baseline Credit Assessment, affirmed b2

 

Outlook Action:

 

....Outlook, Changed To Stable From Negative


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