Fitch affirms UBA’s positive outlook, credit worthiness
Fitch, one of the foremost global credit rating agencies has affirmed the Long Term Issuer Default rating of UBA at “B”, with a stable outlook.According to Fitch, the rating of UBA Plc is driven by the standalone creditworthiness of the Bank, as defined by its viability rating, which is constrained by Nigeria’s operating environment.
In the report issued in the evening of January 31, 2018, Fitch highlights UBA’s systemic importance, its well established franchise and internationalization across 19 African countries, all of which reinforce the rating strength of the Bank.Just as most equity and credit analysts, Fitch views UBA’s earnings and profitability positively, especially as it’s reported impaired loans/gross loans ratio (Non Performing Loan Ratio) remains relatively low around four per cent.
Assessing the Bank’s loan portfolio, Fitch notes; “Corporate lending dominates the loan book, but much of it is collateralised.UBA’s exposure to the oil and gas sector represents 20% of total loans, lower than the 30% sector average, a reflection of the diversified structure of UBA’s credit portfolio and an apparent evidence of its sound risk management.
Fitch noted the improved foreign currency liquidity of UBA, following the successful issuance of a USD500 million Eurobond in 2017 and also affirms the strength of the bank’s local currency funding profile.
The Group is largely funded by historically stable deposits and UBA’s strategy is to continue to expand its low-cost retail deposit base, Fitch asserts.
According to the rating agency, UBA’s retail deposit is higher than the average of peers and local currency liquidity ratios are high.
“We reckoned UBA maintained a liquidity ratio of 40% through the first nine months of 2017, a notable buffer over the regulatory requirement of 30%, despite the stressed liquidity in the Nigerian banking system within the period,” the company noted in its report.As regards capitalization, Fitch views the Bank’s capital ratios to be in line with other large Nigerian banks and noted that the National Ratings of UBA Plc reflects its creditworthiness relative to Nigeria’s best credit and to peers operating in Nigeria.
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