Global rating agency, Fitch Ratings, has expressed concern over the ability of the federal government to support the banking industry especially in terms of foreign exchange.
Fitch stated this in its latest credit ratings for three Nigerian Tier-1 banks namely Access Bank, Guaranty Trust Bank (GTBank) and United Bank for Africa (UBA).
Stressing that the credit rating of each bank is constrained by the operating environment in Nigeria, Fitch said: “The fragile economic recovery restrains banks’ growth prospects and asset quality. Operating conditions are still difficult for banks. “Despite stronger oil prices in second half of 2018 (H2’18) supporting economic growth, credit demand is weak and banks face pressure on margins and capital.
“Fitch believes that sovereign support to Nigerian banks cannot be relied on given Nigeria’s weak ability to provide support, particularly in foreign currency. In addition, there are no clear messages of support from the authorities regarding their willingness to support the banking system.
“Therefore, the Support Rating Floor of all Nigerian banks is ‘No Floor’ and all Support Ratings are ‘5’. This reflects our view that senior creditors cannot rely on receiving full and timely extraordinary support from the Nigerian sovereign if any of the banks become non-viable.”
The global rating agency however upgraded United Bank for Africa Plc’s Long-Term Issuer Default Rating (IDR) to ‘B+’ from ‘B’. “The Outlook is Stable. UBA’s Viability Rating, VR, has been upgraded to ‘b+’ from ‘b’,” it stated.
Fitch also revised the outlook on GTBank’s Long-Term Issuer Default Rating, IDR, to Stable from Negative and affirmed the IDR at ‘B+’. It also upgraded GTB’s Long-Term National Rating to ‘AA(nga) from ‘AA-(nga)’.
“The revision of GTB’s Outlook to Stable mirrors the recent action on Nigeria’s ‘B+’ sovereign rating. The upgrade of the Long-Term National Rating reflects improvement relative to Nigerian peers,” it stated,” it stated.
Fitch however affirmed Access Bank Plc’s Long-Term IDR at ‘B’ with a Stable Outlook.
“The Viability Rating (VR) is affirmed at ‘b’. The IDRs of Access are driven by its intrinsic creditworthiness as defined by its VR. The VR reflects Access’s position as one of the country’s largest banks with an overall domestic market share of approximately 11 percent, as well as the bank’s sound financial metrics and reasonable capital buffers, which are at the upper end of rated Nigerian banks. The VR also factors in the bank’s highly concentrated loan book,” it stated.