Modupe Gbadeyanka
By Modupe Gbadeyanka
Moody’s Investors Service has assigned first-time ratings to Union Bank of Nigeria Plc: long- and short-term Local and Foreign Currency Deposit and Issuer Ratings of B2/Not Prime, and a b3 Baseline Credit Assessment (BCA).
Also, Moody’s assigned long- and short-term Counterparty Risk (CR) Assessment of B1(cr)/Not Prime(cr), long- and short-term National Scale Local Currency Ratings of Aa3.ng/NG-1, and long- and short-term National Scale Foreign Currency Ratings of A1.ng/NG-1.
The rating agency stated in a statement last week that the overall outlook on the bank’s ratings is stable.
The standalone BCA of the bank reflects Moody’s expectation of robust levels of tangible common equity over the next 12 to 18 months, following recent approval by the bank’s board and shareholders to raise capital via a rights issue.
In addition, it shows a stable deposit-based funding structure and moderate local currency liquidity buffers.
“These strengths are balanced against Nigeria’s challenging operating environment, which takes into account both institutional and structural weaknesses and the strong growth potential of the system as well as elevated credit risks on the back of single-name and sector concentration risks; and relatively modest profitability levels versus larger local peers,” Moody’s said in a statement.
The deposit ratings incorporate one notch of uplift from the bank’s b3 baseline credit assessment (BCA), based on our assessment of a ‘moderate’ likelihood of government support in the event of need.
“Our assessment of support reflects the bank’s importance within the Nigerian banking system, with an estimated 4 percent market share of total assets (N1.3 trillion, $3.5 billion) as of December 2016, and the government’s willingness to support banks, as indicated in past crises,” the statement said.
