Fitch Ratings has revised the Outlooks on the Long-Term
Issuer Default Ratings (IDR) of four Nigerian banks, Zenith Bank plc (Zenith),
Guaranty Trust Bank plc (GTB), United Bank for Africa plc (UBA) and Bank of
Industry Limited (BOI), to Negative from Stable and affirmed their IDRs at
'B+'. The agency has also affirmed the 'AAA(nga)' National Ratings of Stanbic
IBTC Holdings PLC and Stanbic IBTC Bank PLC.
The rating actions follow the revision of the Outlook on
Nigeria's Long-Term IDRs to Negative from Stable on 19 December 2019.
Key Rating Drivers
IDRs, VRs, Senior Debt Ratings
Zenith, GTB and UBA are the highest-rated commercial banks
in Nigeria (on the international scale). The ratings are driven by their
standalone creditworthiness, as defined by their respective Viability Ratings
(VRs). In Fitch's view, the VRs are capped by the Nigerian sovereign
(B+/Negative) rating, given the concentration of the banks' activities within
Nigeria, including lending to the real-economy sector, and the banks' linkage
to the sovereign credit profile through significant exposure to government securities.
Fitch expects the banks' credit profiles to be negatively
affected in the event of a sovereign downgrade, particularly if this is
accompanied by sharp naira devaluation. In this event, our assessment is that
capital and, potentially, asset-quality metrics would be negatively impacted.
Accordingly, Fitch has revised the Outlook on the Long-Term IDRs of these three
banks to Negative.
BOI is a state-owned development bank and its Long-Term IDR
is equalised with the Nigerian sovereign rating and driven by its Support
Rating Floor (SRF) of 'B+', which reflects a limited probability of support
from the state if required. The Negative Outlook on BOI mirrors that on the
Nigerian sovereign. Our view of support considers BOI's 99.9% state ownership, policy
role and strategic importance to Nigeria's economic and industrial development.
Support Ratings And Support Rating Floors
We have affirmed the Support Ratings and Support Rating
Floors of Zenith, GTB, UBA and BOI given that our assessment of sovereign
support remains unchanged.
National Ratings
The National Ratings reflect the issuers' creditworthiness
relative to other Nigerian issuers. The National Ratings of all banks have been
affirmed, given that their creditworthiness relative to other issuers in
Nigeria is not expected to change as a result of the rating action on the
Nigerian sovereign.
Rating Sensitivities
The Negative Outlook on Zenith, GTB, UBA and BOI reflects
our view that a sovereign downgrade would likely be accompanied by a downgrade
of these issuers' Long-Term IDRs. The ratings of Zenith, GTB and UBA are also
sensitive to deterioration in operating environment and its impacts on asset
quality and capitalisation.
BOI's IDRs, Support Rating and SRF are sensitive to changes
in Nigeria's sovereign ratings. The bank's ratings are also sensitive to a
reduced propensity of the authorities to support the bank but this is not our
base case.
The National Ratings are sensitive to a change in Fitch's
opinion of the banks' creditworthiness relative to other issuers in Nigeria.
Public Ratings With Credit Linkage To Other Ratings
BOI's IDRs are a equalised with Nigeria's sovereign ratings
and move in tandem with the latter.
Stanbic IBTC Holdings PLC's and Stanbic IBTC Bank PLC's
National Ratings are driven by potential support from ultimate parent, Standard
Bank Group.
ESG Considerations
The highest level of environmental, social and governance
(ESG) credit relevance for BOI, GTB, UBA and Zenith, is a score of 3. This
means ESG issues are credit-neutral or have only a minimal impact on the
entities, either due to their nature of to the way in which they are being
managed by the entities.
