Fitch, Agusto affirm BoI’s positive outlook, improved ratings
Rating agencies, Fitch Ratings and Agusto&Co have revised the Bank of Industry’s ratings from Aa- to Aa by the latter while Fitch retained the bank’s Long-Term issuer Default Ratings (IDR) of AA+ (nga).
According to Agusto&Co, the Aa assigned rating reflects the development finance institution’s very good financial condition and strong capacity to repay obligations on a timely basis.
Indeed, Agusto noted that the rating recognises BOI’s good capitalisation levels, acceptable asset quality, good liquidity profile and low cost funding base during the review period of 2018.
On its part, Fitch noted that BoI’s ratings are sensitive to any change in the state’s ability to support the bank, as indicated by a downgrade of Nigeria’s sovereign rating, adding that the bank’s strong capital ratios are prudent given the DFI’s sensitivity to the volatile economic environment.
Though the rating agencies affirmed the susceptibility of the bank’s fragility in the macroeconomic environment, particularly as it targets risky economic sectors; they noted that safety measures such as bank guarantees, treasury bills, and Federal Government bonds provided by large corporates mitigate risks to an extent.
With the bank’s non-performing loan (NPL) ratio standing at 4.9% at end of first half 2018, the rating agencies noted that there are expectations that the volume of delinquent loans to moderate slightly in the near term given some remedial actions taken on the affected impaired loans.
On the bank’s outlook, Agusto said: “While the Bank’s funding base has grown significantly, its loan portfolio has not shown that level of growth. This is as a result of major challenges the Bank faces, such as insufficient capacity to reach micro, small and medium scale business across the country and the dearth of bankable projects.
“To extend its reach, BOI is partnering with commercial and microfinance banks which have the branch network and staff strength to penetrate the market nationwide. However, insufficient bankable projects remain a drag on the Bank’s projected performance. This is primarily due to the weak macroeconomic and operating environment which deters businesses from thriving.
“Going forward, we expect the Bank’s performance to be upheld by the support of its two largest shareholders which drives the lending business, funding from multilateral finance organisations and an experienced management team overseeing the daily operations of the Bank”.
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