Global Rating Agency, Fitch Ratings, has released its credit
rating for three tier-1 banks in the country. The banks include United Bank for
Africa (UBA), Access Bank and Guaranty Trust Bank Plc (GTBank).
Fitch Ratings upgraded United Bank for Africa Plc’s (UBA)
Long-Term Issuer Default Rating (IDR) to ‘B+’ from ‘B’, with a Stable outlook.
Also, UBA’s Viability Rating (VR) was upgraded to ‘b+’ from ‘b’. According to
Fitch, UBA’s IDRs are driven by its intrinsic creditworthiness, as defined by
its VR.
“However, UBA’s VR is constrained by the operating
environment in Nigeria (B+/Stable) where the fragile economic recovery
restrains banks’ growth prospects and asset quality. The VR reflects UBA’s
position as one of Nigeria’s largest banks, as well as its sound financial
metrics and reasonable capital buffers. It controls an overall market share in
Nigeria of approximately 10% and its well-established franchise is a rating
strength.”
Access Bank Rating
Fitch Ratings affirmed Access Bank Plc’s Long-Term Issuer
Default Rating (IDR) at ‘B’ with a Stable Outlook. The Viability Rating (VR) is
affirmed at ‘b’.
According to the Fitch, Access Bank’s VR reflects adequate
profitability, although this is weaker than its other immediate peers. Relative
earnings weakness reflects a higher cost structure and a modest retail
franchise, resulting in a higher cost of funding than its peers.
“Efforts to attract new retail depositors, particularly
through digital channels continue. Liquidity ratios are sound, with cash
holdings and government securities representing around 40% of total assets.”
Foreign currency refinancing risks for Access Bank have
eased with the bank issuing a five-year USD300 million 10.5% Eurobond in October
2016 (issued by Access Finance BV), which partly refinanced a USD350 million
7.25% Eurobond bond maturing in July 2017.
GTBank Rating
Fitch Ratings revised the Outlook on Guaranty Trust Bank
Plc’s (GTBank) Long-Term Issuer Default Rating (IDR) to Stable from Negative
and affirmed the IDR at ‘B+’. Fitch also upgraded GTB’s Long-Term National
Rating to ‘AA(nga) from ‘AA-(nga)’.
The rating noted that GTBank’s IDRs are driven by the bank’s
intrinsic creditworthiness as defined by its Viability Rating (VR). GTBank’s VR
is the highest assigned by Fitch to a Nigerian bank. The rating further noted
that GTBank is one of Nigeria’s largest banks, controlling an overall domestic
market share of approximately 11%.
Why the ratings are so important
Credit ratings are used by investors as indications of the
likelihood of receiving the money owed to them in accordance with the terms on
which they invested. The investment grade and speculative grade have
established themselves over time as shorthand to describe the categories ‘AAA’
to ‘BBB’ (investment grade) and ‘BB’ to ‘D’ (speculative grade). The Investment
grade categories indicate relatively low to moderate credit risk, while ratings
in the speculative categories either signal a higher level of credit risk or
that a default has already occurred.
Fitch Ratings is a global provider of credit ratings and
research. Founded in 1913, the company is part of the Fitch Group based in New
York. It is one of the Big Three credit rating agencies in the world.
