Fitch Ratings, a rating agency for financial institutions has affirmed the Long-term Issuer Default Ratings (IDR) of eight Nigerian banks while on of them was downgraded by the organisation.
The eight banks affected with the affirmation are Zenith Bank, First Bank, United Bank for Africa, Guaranty Trust Bank, Access Bank Plc, Diamond Bank, Fidelity Bank and Stanbic IBTC Bank. Union Bank stood out as the Nigerian bank downgraded from the Long-term IDR.
With the present state of affairs, Union’s Support Rating Floor (SRF) has been revised to ‘B’ from ‘B+’ due to its perceived lower systemic importance post restructuring. In addition, the bank’s Long-term IDR has been downgraded to ‘B’ from ‘B+’ and its National Rating to ‘BBB+(nga)’ from ‘A+(nga)’. At the same time, Union’s Viability Rating (VR) has been upgraded to ‘b-‘ from ‘ccc’ due to its improved financial position with on-going restructuring.
The agency said Access’s VR has been upgraded to ‘b’ from ‘b-‘ given its larger franchise, improving performance and commitment to maintaining healthy Fitch core capital (FCC) ratios over the medium term and despite its high cost to income ratio as it integrates a large acquisition. As a consequence, the bank’s Long-term IDR is now driven by its VR of ‘b’ rather than its SRF of ‘B’.
The Long-term IDRs of FBN, UBA, Diamond, Fidelity and Union are driven by Fitch’s perceived level of support from the Nigerian authorities if required. Zenith, GTB and Access have IDRs that are driven by their intrinsic strengths as defined by their VRs. Zenith and GTB have higher VRs relative to their peers, given their strong franchises and track record of financial performance through the cycle.
All the banks (apart from SIBTC) have Support Ratings of ‘4’ which indicates a minimum SRF of ‘B’. FBN, Zenith and UBA have SRFs of ‘B+’, as the most systemically important banks, in Fitch’s view, based on their dominant retail franchises and importance to the real economy, while GTB,Access, Diamond, Fidelity and Union have SRFs, one notch lower at ‘B’.