Fitch Downgrades Two of Nigeria’s Biggest Banks

Fitch Ratings has downgraded two of Nigeria’s biggest banks, citing the recent drawdown of the nation’s sovereign credit rating.

The global credit rating downgraded the United Ban of Africa (UBA) and First Bank of Nigeria.

In the report announcing the current ratings of Nigerian banks, Fitch Ratings said “it has downgraded First Bank of Nigeria Ltd’s (FBN) and United Bank for Africa’s (UBA) Long-Term Foreign Currency Issuer Default Ratings (IDRs) to ‘B’ from ‘B+’.”

Also, the agency downgraded the National Long-Term Rating of FBN Holdings Plc (FBNH), the parent holding company of FBN, to ‘BBB+ (nga)’ from ‘A (nga).”

The agency said while the economic outlook for Nigerian banks remain stable, the recent forex flexibility policy, rising non-performing loans and sustained low crude oil prices remain threats to the financial system.

“The Outlook on the Long-Term Foreign Currency IDR of one of the banks, Guaranty Trust Bank (GTB), has been revised to Stable from Negative due to continuing strong earnings and stronger-than-expected liquidity. Our rating actions follow the downgrade of Nigeria’s sovereign ratings on 23 June 2016.

“The IDRs of UBA, Access Bank (Access) and Wema Bank (Wema) are driven by both their standalone strengths, reflected in their VRs, and by the likelihood of sovereign support, reflected in their SRFs.” Their VRs and SRFs are at the same level. The IDRs of FBN, Diamond Bank (Diamond), Fidelity Bank (Fidelity), Union Bank (Union) and First City Monument Bank (FCMB) are driven by their SRFs.

“Fitch has revised the SRFs to ‘B’ from ‘B+’ for the systemically important banks, FBN, UBA, Zenith and GTB following the downgrade of Nigeria’s sovereign ratings. As a result, both FBN’s and UBA’s IDRs have been downgraded to ‘B’ from ‘B+’. The IDRs of both Zenith and GTB are affirmed at ‘B+’ and are now driven by their respective VRs of ‘b+’.

“The systemically important banks’ SRFs remain a notch below the sovereign rating, reflecting the sovereign’s weak foreign currency position,” the report says.