Moody’s Investors Service, (Moody’s) has assigned national scale ratings (NSRs) to seven Nigerian banks.
The banks include Sterling Bank Plc, Zenith Bank Plc, Guaranty Trust Bank Plc(GTBank), Access Bank Plc, United Bank for Africa Plc (UBA), First Bank of Nigeria Limited (FBN) and the Bank of Industry (BOI).
The rating action followed the publication of new national scale rating maps for Nigeria, Kenya and Morocco on 28 October 2016.
NSRs provide a measure of relative creditworthiness within a single country, and are derived from global scale ratings (GSRs) using country-specific maps. With fewer than 20 fundamental issuers in Nigeria rated by Moody’s, the NSR map has been designed using Moody’s standard approach, whereby the map design is selected from a set of standard maps based upon the anchor point, or the lowest GSR that can map to a Aaa.ng. As per the standard approach, Nigeria’s anchor point is set at B1, on par with the sovereign rating.
For Sterling Bank, Moody’s assigned A1.ng/NG-1 national scale local currency deposit ratings to the bank. These ratings on the bank were underpinned by a standalone baseline credit assessment (BCA) of b3 and one notch of government support uplift, which results in a global scale long-term issuer and deposit rating of B2.
“The A1.ng rating is the second highest of three NSR categories corresponding to the bank’s local currency deposit GSR. Moody’s also assigned A2.ng/NG-1 national scale foreign currency deposit ratings to Sterling.
“Sterling’s national scale ratings capture the bank’s solid asset quality metrics (reported non-performing loans ratio of 2.8 per cent as of end-June 2016 versus 11.7 per cent for the banking system) and provision coverage; and solid deposit funding base.
“These strengths are balanced against low foreign currency liquidity buffers, which underpin the lower national scale foreign currency deposit rating compared with its local currency deposit national scale rating; vulnerabilities in asset quality on account of high single-name and sector concentration risks (e.g. oil and gas loans are 40 per cent of gross loans); and relatively modest capital levels, especially versus the bank’s high foreign currency loans exposure (47% of gross loans),” Moody’s added.
Furthermore, it pointed out that Sterling Bank has significant amounts of outstanding US dollar obligations coming due over the next 18 months compared to US dollar liquid assets currently on its balance sheet.
For Zenith Bank, Moody’s assigned the lender Aaa.ng/NG-1 national scale local currency deposit ratings.
These ratings were underpinned by a standalone baseline credit assessment (BCA) of b1, which results in a global scale long-term issuer and deposit rating of B1. The Aaa.ng rating is the highest of three NSR categories corresponding to the bank’s local currency deposit GSR. The bank’s national scale foreign currency deposit ratings of Aa3.ng/NG-1 are constrained by the relevant country ceiling.
It explained that Zenith’s national scale ratings captured the bank’s robust capital buffers, which provide a relatively thick cushion to withstand asset quality deterioration; low stock of NPLs, accounting for around 1.6 per cent of gross loans (Moody’s adjusted) as of June 2016 (against a system average of around 11.7%); high liquidity buffers, complimenting a predominantly deposit funded balance sheet; and a strong and well-established franchise, which allows the bank to attract inexpensive deposits and to lend to high credit quality borrowers (relative to other Nigerian banks), resulting in relatively low NPLs and credit costs.
Also, for GTBank, Moody’s assigned Aa1.ng/NG-1 national scale local currency deposit ratings to Guaranty Trust Bank Plc (GTBank). These ratings were underpinned by a standalone baseline credit assessment (BCA) of b1, which results in a global scale long-term issuer and deposit rating of B1.
The Aa1.ng rating is the second highest of three NSR categories corresponding to the bank’s local currency deposit GSR. The bank’s national scale foreign currency deposit ratings of Aa3.ng/NG-1 are constrained by the relevant country ceiling.
Furthermore, the statement explained that GTBank’s national scale ratings captured the bank’s resilient earnings generating capacity and robust capital buffers, which together provide a relatively thick cushion to withstand asset quality deterioration compared with domestic peers; high liquidity buffers and a predominantly deposit funded balance sheet; and early adoption of electronic banking platforms, which has allowed it to establish a robust retail franchise. These strengths are partially moderated by concentration risks in the bank’s loan book, including to the oil and gas industry (39.2% of gross loans) and loans denominated in foreign currency (55.6% of gross loans).
In the same vein, for Access Bank Plc, Moody’s assigned Aa2.ng/NG-1 national scale local currency deposit ratings to the bank.
“These ratings are underpinned by a standalone baseline credit assessment (BCA) of b2 and one notch of government support uplift, which results in a global scale long-term issuer and deposit rating of B1. The Aa2.ng rating is the lowest of three NSR categories corresponding to the bank’s local currency deposit GSR. The bank’s national scale foreign currency deposit ratings of Aa3.ng/NG-1 are constrained by the relevant country ceiling,” it added.
In the same vein, Moody’s assigned Aa2.ng/NG-1 national scale local currency deposit ratings to the UBA.
“These ratings are underpinned by a standalone baseline credit assessment (BCA) of b2 and one notch of government support uplift, which results in a global scale long-term issuer and deposit rating of B1. The Aa2.ngrating is the lowest of three NSR categories corresponding to the bank’s local currency deposit GSR. The bank’s national scale foreign currency deposit ratings of Aa3.ng/NG-1 are constrained by the relevant country ceiling,” it added.
Furthermore, Moody’s assigned A2.ng/NG-1 national scale local and foreign currency deposit ratings to FBN. These ratings were underpinned by a standalone BCA of b3 and one notch of government support uplift, which results in a global scale long-term issuer and deposit rating of B2. The A2.ng rating is the lowest of three NSR categories corresponding to the bank’s local and foreign currency deposit GSRs.
Moody’s also assigned Aa1.ng/NG-1 national scale local and foreign currency issuer ratings to BOI. These ratings are underpinned by a standalone credit assessment of b2 and one notch of government support uplift, which results in a global scale long-term issuer rating of B1. – Thisday.
