First City Monument Bank, FCMB Plc’s operating profitability has been rated among the weakest of all rated Nigerian banks by Fitch Ratings.
This was contained in a statement issued by the global rating firm, which announced affirming the lender’s Long-Term Issuer Default Rating (IDR) at ‘B-‘ with stable outlook.
Fitch said however, the lender’s asset quality performance is healthy, particularly given challenging operating conditions in Nigeria, including tight local and foreign currency liquidity.
It added that tight liquidity stems from the sharp fall in oil prices, which has adversely impacted asset quality sector-wide.
FCMB’s VR also considers its modest franchise, with a market share of around 4% of loans and deposits. In our view, this drives a high risk business model, including high concentrations and a higher volume of lending down the credit curve to smaller corporates and commercial customers, it said.
The franchise also drives weak earnings metrics and a weaker funding and liquidity profile than larger Nigerian banks and the lender has a reasonable retail deposit franchise, but deposits have to be supplemented by short- and long-term wholesale funding to support operations.
According to Fitch, FCMB’s National Ratings are a reflection of its creditworthiness relative to the best credits in Nigeria. FCMB’s National Ratings consider generally weaker financial metrics than peers, and the bank’s modest franchise.
Fitch said it believes that sovereign support to Nigerian banks cannot be relied on given Nigeria’s (B+/Negative) weak ability to provide support, particularly in foreign currency.
