Moody’s assigns Sterling Bank B2 rating, stable outlook

A leading global rating agency, Moody’s Investors Service, has assigned first-time local and foreign currency issuer and deposit ratings of B2 with stable outlooks to Sterling Bank plc.

It also assigned Sterling Bank a Counterparty Risk Assessment (CRA) of B1 (cr)/Not Prime(cr), which ratings it said were underpinned by a b3 Baseline Credit Assessment (BCA).

BCA is the measure of an issuer’s standalone financial strength that describe the probability of a bank defaulting on any of its rated instruments, in the absence of external support.

Last week, DataPro, a Credit Rating Agency (CRA), had re-affirmed Sterling Bank’s long-term rating of BBB with a stable outlook for the year 2015/2016

Moody’s said that the rating reflects the bank’s “solid asset quality metrics and provision coverage”, improvements in Information Technology (IT) infrastructure and risk management processes, as well as its high liquidity buffers and a solid deposit funding base.

“These strengths are balanced against Nigeria’s (Ba3, stable outlook) challenging operating environment, which takes into account both the strong growth potential of the system and institutional and structural weaknesses,” Moody’s said.

It added that the ratings incorporate a one-notch uplift from Sterling’s b3 baseline credit assessment (BCA), based on its assessment of a moderate likelihood of government support in the event of need.

The rating agency also explained that the important factor that drove its view of Sterling Bank’s standalone assessment is the lender’s asset quality.

“Non-Performing Loans (NPLs) are currently low and compare favourably against domestic and global peers at 2.7 per cent as of year-end 2014 according to our adjusted ratio, which takes into account not only individually impaired loans, but also loans that are overdue for more than 90 days but not reported as impaired, as we do for other banks.