Fitch Ratings, one of the foremost global credit rating agencies has affirmed the long term issuer default rating of the United Bank for Africa (UBA) at “B”, with a stable outlook.
According to Fitch, the rating of UBA was driven by the standalone creditworthiness of the bank, as defined by its viability rating, which is constrained by Nigeria’s operating environment.
In its latest report, Fitch highlighted UBA’s systemic importance, its well established franchise and internationalisation across 19 African countries, all of which reinforce the rating strength of the Bank.
Furthermore, Fitch viewed UBA’s earnings and profitability positively, especially as it’s reported impaired loans/gross loans ratio (i.e non-performing loan ratio) remained relatively low at around four per cent.
Fitch noted: “Corporate lending dominates the loan book, but much of it is collateralised. UBA’s exposure to the oil & gas sector represents 20 per cent of total loans, lower than the 30 per cent sector average.”
This, it stated was a reflection of the diversified structure of UBA’s credit portfolio and an apparent evidence of the sound risk management of the Bank.
In addition, Fitch noted the improved foreign currency liquidity of UBA, following the successful issuance of a $500 million Eurobond in 2017 and also affirmed the strength of the bank’s local currency funding profile.
According to the rating agency, UBA’s retail deposit is higher than the average of peers and local currency liquidity ratios are high.
“We reckoned UBA maintained a liquidity ratio of 40% through the first nine months of 2017, a notable buffer over the regulatory requirement of 30%, despite the stressed liquidity in the Nigerian banking system within the period.”
As regards capitalisation, Fitch anticipated the bank’s capital ratios to be in line with other large Nigerian banks, noting that the National Ratings of UBA Plc reflects its creditworthiness relative to Nigeria’s best credit and to peers operating in Nigeria.
