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Moody’s Affirms African Development Bank AAA Rating, Stable Outlook

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Moody’s Investors Service (“Moody’s”) has affirmed the African Development Bank‘s Aaa long-term issuer and senior unsecured ratings. The outlook remains stable.

In a rating action note dated 28 October 2021, Moody’s said the key factors underpinning the affirmation include robust capital buffers, combined with superior risk management which contain the challenges associated with low development asset credit quality amid a difficult operating environment; very strong access to funding which supports the bank’s ample liquidity buffer; and very high support from regional and non-regional shareholders to support the African Development Bank’s development mandate.

“The stable outlook reflects Moody’s expectations that African Development Bank’s capital and liquidity buffers will remain in line with Aaa peers and that prudent risk management practices will maintain nonperforming assets at low levels despite a challenging operating environment,” the note further said.

The outlook is also based on expectations that the Bank’s shareholders will continue to provide substantial support, through regular capital increases, and when necessary, the provision of support beyond contractual obligations.

The note also commented on the Bank’s solid capital position. “After several years of rising leverage, AfDB’s leverage ratio improved slightly to 295% in 2020, compared with 298% in 2019. This reflected a combination of a slower pace of lending growth and the first contributions made under the latest general capital increase, GCI VII, which was approved by AfDB’s board in 2019.” Moody’s expects further paid-in capital contributions from shareholders to prevent a deterioration in leverage over the next several years.

The bank’s liquidity buffer is among the strongest within the Aaa-rated peer group, with liquid assets covering 101% of net cash outflows over an 18-month horizon.

“As one of the main conduits for private investment and development goals on the African continent, Moody’s views the ability and willingness of AfDB’s shareholders to provide support to be very high, which provides uplift to the bank’s intrinsic financial strength.”

Non-regional member countries account for 40% of the Bank’s capital subscription, including a number of highly rated sovereigns like the United States (Aaa, stable), Japan (A1, stable), Germany (Aaa, stable), Canada (Aaa, stable) and France (Aa2, stable), highlighting the ability and willingness of shareholders to support the African Development Bank’s development objectives.

Additionally, the African Development Bank’s non-regional shareholders have a track record of demonstrated support to the institution beyond their ongoing contractual involvement, including a history of temporary callable capital solutions to support the institution during particular periods.

Commenting on the rating newly appointed Senior Vice President of the African Development Bank Group, Bajabulile “Swazi” Tshabalala said: “Moody’s assessment reflects the financial strength of the African Development Bank, an institution resolutely geared towards putting Africa on a path to inclusive and sustainable growth.”

Banking Sector

Moody’s Upgrades Nine Nigerian Banks From Negative to Stable Outlook

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Moody’s Investors Service, a global rating agency upgraded its outlook of 9 Nigerian banks to stable from a negative outlook and affirmed its B2 rating of the banks.

The banks include the five biggest banks in the country; the so-called ‘FUGAZ’, First Bank of Nigeria Limited, United Bank for Africa Plc, Guaranty Trust Bank Limited, Access Bank Plc, and Zenith Bank Plc. Other banks included are Fidelity Bank Plc, Union Bank of Nigeria Plc, FCMB Limited, and Sterling Bank Plc.

It maintains that although the operating environment in Nigeria is tough, the banks’ financial profiles have been generally resilient to the difficult operating environment.

Moody’s explained that the upgrade is based on expectations that the banks’ solvency will remain at adequate levels, supported by resilient profitability over the next 12-18 months before the next upgrade. It also expects that higher oil prices and some measures taken by the government will help stabilize the sovereign’s credit metrics, thus stabilizing the sovereign credit profile and, in turn, those of the banks.

It went on to say that the Banks’ pre-provision profitability is recovering to pre-pandemic levels while their capital and funding positions, particularly in local currency, have remained strong. It believes the change in outlook is linked to that of the Government. It affirmed the Nigerian government’s long-term issuer ratings of B2 and changed the outlook to stable from negative on the 29th of November 2021.

Nonperforming loans have decreased in recent years, the average NPL ratio reported fell from 6% at the end of 2020 to 5.3% in October 2021. The rating agency expects some asset quality deterioration once forbearance lapses but expects the pressures to be mitigated by the high oil prices if the prices are sustained. Moody’s maintains that although the operating environment in Nigeria is tough, the banks’ financial profiles have been resilient to the operating environment in Nigeria.

Moody’s Investors Service is a leading provider of credit ratings, research, and risk analysis that covers 130 countries, 11,000 corporate issuers, 21,000 public finance issuers, and 76,000 structured finance obligations.

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Banking Sector

Nigeria’s Average Banking Return on Equities (ROEs) to Hit 21 Percent – McKinsey & Company

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The financial services industry is surviving the economic ravages of COVID-19 better than expected, but banks are quickly splitting into “rock star” performers and poorly performing laggards. Welcome to the great divergence!, stated McKinsey & Company.

McKinsey & Company, a global management consulting firm, examines how banks fared in the whirlwind of 2020; details the factors that will influence their economic fate in the coming years (such as geography, customer base, scale, and business model); and looks at the forces lifting one set of banks above the rest.

In the 11th edition of McKinsey & Company Global Banking Annual Review 202 report released on December 2, 2021, the financial services industry is said to be trading at 1.3 times equity book value globally while in Africa banks ate trading at 1.0 times, Nigerian banks are trading at 0.4 times equity on the books. See key findings below.

Key 2021 report findings include that:

  • Financial services as a whole (including banks, fintechs, and specialists) is trading at 1.3 times equity book value globally, well below the remaining sectors at 3.0 times book value. Globally and in Africa, banks are trading at 1.0 times, while Nigerian banks are trading at 0.4 times the equity on their books.
  • Payments specialists, exchanges, and some securities firms captured more than 50 percent of the $1.9 trillion in market cap that the industry added globally.
  • The gap between the banking industry’s leaders and laggards, as measured by total return to shareholders (TRS), has steadily widened. In Africa, TRS for the top-quintile performers was 159 basis points higher than the bottom quintile in 2021. This gap has tripled in the past ten years, with most of the divergence happening in the past four years.

The analysis shows that there are four primary sources for the divergence. The first three—geography, scale, and segment focus—are difficult for banks to change. The fourth—business model—is well within banks’ power to adapt, and our analysis found that banks with capital-light and specialized businesses focused on fees typically thrive. Weak performers can catch up, but time is short. Two-thirds of the value generated (valuations/market cap) during an entire economic recovery cycle is created during the first two years after a crisis.

“In Africa, average banking return on equities (ROEs) dipped from 15 percent in 2019 to 9 percent in 2020, a steeper fall than global ROEs. The industry is set for a recovery that could put African banking ROEs at between 13 and 15 percent by 2025. In Nigeria, average ROEs dropped from 20 percent to 18 percent between 2019 and 2020, and are expected to recover to between 19 and 21 percent, said Mayowa Kuyoro, a Partner in McKinsey’s Lagos office.

Overall, fintechs and specialized financial-services providers—in payments, consumer finance, or wealth management—are generating higher valuation multiples than most global universal banks. This is no different in Africa. Over the last 12 months, we have witnessed some of these institutions achieve valuations that have been higher than universal banks. Some fintechs are going from a rough sketch to billion-dollar valuation in a few years.

There is a significant competitive advantage linked to scale. In Africa, the top three largest banks in each country are on average 10 points more cost-efficient than the rest of the market. Banks often can’t change their geography, scale, or segment, but the business model they adopt is in their control. Yet many traditional banks have pursued a commoditized universal bank business model based on retail deposits and corporate lending.

According to the report, African banking is now more profitable, and revenues are expected to grow faster than the rest of the global industry with an average growth rate of between 7 and 9 percent.

“We are seeing an accelerating divergence of returns between top and bottom African banking players,” said Francois Jurd de Girancourt, Head of McKinsey’s Banking Practice in Africa. “Winners are benefiting from the great divergence in three ways: (i) by focusing on customer ownership—leveraging technology to increase contacts points and leveraging customer data to personalize offers; (ii) by growing the fee part of the business on the continent—leveraging consumer and merchant payments, corporate transaction banking services and wealth products; and (iii) by deploying the balance sheet outside of their traditional customer base—lending to the unbanked/low-data consumers and SMEs, and offering new products, e.g., through apps and wallets.”

The next few years are crucial for any African bank with aspirations to land on the right side of the divergence described in this year’s report. Not only is there simply no value to waiting, but also history shows a pattern in which institutions that take bold steps toward growth in the first years after a crisis generally hold on to those gains for the longer term.

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Banking Sector

Enabling Dreams With First Bank ‘December is A VYBE’

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First Bank

One of the most fascinating quotes of popular British business magnate and author, Sir Richard Brandson is that “A great business is simply an idea to make other people’s lives better.” This vital nugget aligns with a global view that a critical element of successful brands is the ability to beyond functional products benefits become a visible partner in customers lives, enabling them live better and happier, aim higher and achieve their dreams.

For businesses, this means seeing beyond financial gains into becoming a true ally and partner who make life worth living. This is a core hallmark of the few enduring global brands and FirstBank appears focused on towing the path.

Beyond business promotion and marketing engagements solely for commercial value, the premier bank in its 127th year is assisting Nigerians to live happier and create awesome memories of good time with cherished ones through some cool initiatives.

Globally, December heralds the holiday season during which people love to celebrate, unwind and relax with loved ones. Though checkered by Covid-19 disruptions in 2020, FirstBank is giving a new expression and meaning to ‘December in Nigeria’ with the high-octane and life enriching #FirstBankIssaVybe, #DecemberIssaVybe campaign.

The campaign which started in 2018 is already generating ripples across the cities with Nigerians across ages anticipating the new trick FirstBank will pull out from the hat this year.

Through the annual FirstBankIssaVybe campaign, FirstBank sponsors of an array of the hottest and coolest entertainment platforms across music, fashion and arts during the month of December, with massive ticket giveaways to premium events.

The goal is to create enthralling and memorable experience for customers in the Yuletide season as they bond with family and friends, whilst connecting with their favourite superstars.

Commenting with much enthusiasm on the year-end campaign, global head marketing and corporate communication of FirstBank, Folake Ani-Mumuney says it’s simply FirstBank creating a ‘Wow December to Remember’ experience for all as a bank for all generations.

For her, #FirstBankIssaVybe offers a variety performance; FirstBank is not just considering financial well-being but also the entire well-being for customers. That is why it is enabling opportunities for families to come together to celebrate and enjoy premium concerts, plays, fashion and food, and gave out over 500 mostly VIP tickets per campaign, which cost from N15,000 to N50,000.

“We are delighted with our achievements and consider the yuletide a good way of identifying with our customers and appreciating their support. We want them to have the best of fun through this period. Through different expressions, we strive to support our heritage; the value systems we believe in and create opportunities for families to bond across generations.

“The carefully curated experiences speak to our ethos, what we believe in and what Nigerians would appreciate. We do not just concentrate like some other brands on specific areas, or just one name; we are true enablers across the raft, and offered variety.  We also use the opportunity to further deepen support for arts and job creation.

“We also spread the program across the nation with sponsorship of Igue Festival in Edo State, and Calabar Carnival in Cross River State. With our partners, #DecemberIssaVybe, we curate across the country as a whole. We supported Waka the Musical in 2017 which was also taken to Abuja in 2018,” she noted.

Meanwhile, the campaign has seen customers treated to fantastic experience in previous editions and many are looking forward to the 2021 edition. From the exciting Alternative Sound 4.0, held at Terra Culture on 5 December, 2019 to the memorable Cardi B live in Lagos by Livespot Concert on 7 December 2019 and the unforgettable “An Evening with FBNHoldings” held on 13 December, 2019 to the pleasure overload of Island Block Party at Oniru Lagos on 14 December, lucky customers and followers of the Bank’s social media handles were given free tickets to have loads of fun!

Also, in the bouquet of fun extravaganza was Teni – The Billionaire Experience musical concert held at Eko Hotel on Monday, 16 December 2019 which had many customers thrilled to the finest of tunes by the Billionaire crooner and other guest artistes present.  The annual Nativeland music festival at Muri Okunola Park was another event for the yuletide which has since its inauguration in 2016, had top class performances by A-lists artistes.

Youth and teenage fashion lovers were not left out; as with Street Souk, they had a feel of current trends and creativity in the fashion industry. The event held on 18 December 2019. Keen on getting exposed to the best and latest designs, wears and fabrics in fashion, then the African Fashion Week Nigeria was another port of call. The event which held 20 – 21 December, 2019 attracted leading players in the fashion industry and deepened the fashion appetite and interest of participants.

Building into Christmas was Flytime Rhythm Unplugged, starting on 20 December at the Eko Hotel and Suites. The 5-day music festival event had performances of leading and top artistes in the country. Olamide, Burna Boy, Tiwa Savage, MI, Ycee, Patoranking, Mayorkun, Teni, Zlatan, Joeboy, Fireboy, B Red, Tolani, Jeff Akoh, Oluwadamilola thrilled fun lovers to the best of tunes topping charts not just in Nigeria but the continent. On the wheels of steel was DJ Neptune, DJ Consequence, DJ Obi, and DJ Cuppy.

Kizz Daniel’s Toro concert on 26 December 2019 and Tu Face’s musical show on 28 December built up to the wrap-up of the list of December events with Future, the American trap music sensation scheduled to perform live in Lagos. The Future Live in Concert held 29 December 2019 at the Eko hotel. The 80s boy band, New Edition performance at the FlyTime Music Festival in Lagos was also electrifying with Burna Boy Live, Davido Live and many more in action!

For plays, the campaign has featured sponsorships of Moremi and Oba Eshugbayi play which focused on highlighted history of Lagos: the struggle over water tax imposed by the British on the people of Lagos and the expulsion of Oba Esugbayi, who stood against the tax, to Abeokuta. The play was from the stable of Joseph Edgar of the iconic Duke of Shomolu Production.

Two lucky fans, Tina Ediale and Timilehin Anibaba, amongst others got to see their favourite star Davido Live in Concert; another winner, Azeez Animashaun couldn’t believe his luck when he got a VIP Rhythm Unplugged ticket while some got special treat watching ace actress Omotola Jalade Ekeinde as Esumirin in Moremi The Musical.

Some social media followers also scored invitation to parties including Island Block Party, All Black Everything; conferences Golas Grit Grind 2.0; festivals: Native Land, Plamwine Festival; and pop up sales: Mente de Moda.

The FirstBank #DecemberIssaVybe and #FirstBankIssaVybe giveaway fest is again set to reward old, new and potential customers with tickets to premium events around Lagos.

And Yes, we know you want to attend these events and yes you can. Just follow FirstBank on any of its social media pages – Facebook: First Bank of Nigeria Limited, Instagram: @firstbanknigeria, and Twitter: @firstbankngr – look out for the posts announcing the giveaway and follow instructions to experience maximum party #vybes this season.

 

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