Fitch Ratings on Thursday affirmed the Support Ratings (SRs) and Support Rating Floors (SRFs) of 10 Nigerian Banks. They are Zenith Bank Plc (Zenith), FBN Holdings Plc (FBNH), First Bank of Nigeria Ltd (FBN), United Bank for Africa Plc (UBA), Guaranty Trust Bank Plc (GTB), Access Bank Plc (Access), and Diamond Bank Plc (Diamond). Others are; Fidelity Bank Plc (Fidelity), Union Bank of Nigeria Plc (Union) and First City Monument Bank Limited (FCMB). The rating actions follow Fitch’s revision of the Outlook on Nigeria’s Long-term Issuer Default Ratings (IDRs) to negative from stable.
Fitch has also affirmed the IDRs and national ratings of six banks namely; FBN, UBA, Diamond, Fidelity, Union and FCMB. The outlooks on these long-term IDRs remain stable. These banks’ IDRs and National Ratings are driven by the probability of sovereign support, as indicated by their SRFs. The National Ratings of Stanbic IBTC Bank Plc (SIBTC) and Stanbic IBTC Holdings Plc (SIBTCH) are unaffected by the sovereign rating action, as their ‘AAA(nga)’ ratings are based on the support that the bank and the holding company derive from Standard Bank Group Limited (SBG; BBB/Negative).
The Viability Ratings (VRs) of Fitch-rated Nigerian banks are unaffected by the sovereign rating action. Therefore, the IDRs and National Ratings of Zenith, FBNH, GTB and Access are unaffected, as these are driven by the banks’ standalone strengths, as indicated by their VRs. Fitch recently reviewed all Nigerian banks’ VRs.
The affirmation of the SRs and SRFs reflects Fitch’s view that the revised sovereign outlook does not indicate a material weakening in the ability of the sovereign to support the banking sector. While the ability to support is already constrained, as indicated by the ‘BB-’ sovereign rating, a potential one-notch downgrade of the sovereign rating would most likely not result in a downward revision of any SRF. The revision of the outlook on the sovereign ratings was driven by a number of factors, including heightened political risk in the context of the presidential election, potential transition issues and the Boko Haram insurgency, as well as significantly weaker fiscal and external buffers and deterioration in economic prospects. Offsetting this Nigeria still has low and stable public and external debt ratios for its rating level, and non-oil growth is expected to remain robust. Fitch considers the authorities’ willingness to support the Nigerian banks to be high as demonstrated by their recent track record of support.
