Fitch Ratings has affirmed the Support Ratings (SRs) and Support Rating Floors (SRFs) of 10 Nigerian banks.
They are Zenith Bank, FBN Holdings (FBNH), First Bank, United Bank for Africa (UBA), Guaranty Trust Bank (GTB), Access Bank (Access), Diamond Bank (Diamond), Fidelity Bank (Fidelity), Union Bank (Union) and First City Monument Bank (FCMB).
Reuters reported that the rating follow Fitch’s revision of the outlook on Nigeria’s Long-term Issuer Default Ratings (IDRs) to Negative from Stable as indicated by the ‘BB-‘ sovereign rating.
Fitch has also affirmed the IDRs and National Ratings FBN, UBA, Diamond, Fidelity, Union, and FCMB. The Outlooks on these Long-term IDRs remain Stable. Their IDRs and National Ratings are driven by the probability of sovereign support, as indicated by their SRFs.
The National Ratings of Stanbic IBTC Bank (SIBTC) and Stanbic IBTC Holdings (SIBTCH) are not affected by the sovereign rating action, as their ‘AAA(nga)’ ratings are based on the support the bank and the holding company derive from Standard Bank Group (SBG; BBB/Negative).
The Viability Ratings (VRs) of Fitch-rated Nigerian banks are not affected by the sovereign rating action. Therefore, the IDRs and National Ratings of Zenith, FBNH, GTB, and Access are not affected, as these are driven by the banks’ standalone strengths, as indicated by their VRs.
Fitch recently reviewed all Nigerian banks’ VRs.
The affirmation of the SRs and SRFs reflects Fitch’s view that the revised sovereign outlook does not indicate a material weakening in the ability of the sovereign to support the banking sector.
While the ability to support is already constrained, as indicated by the ‘BB-‘ sovereign rating, a potential one-notch downgrade of the sovereign rating would most likely not result in a downward revision of any SRF.
The revision of the outlook on the sovereign ratings was driven by a number of factors, including significantly weaker fiscal and external buffers and deterioration in economic prospects. Others are heightened political risk in the context of the presidential election, potential transition issues and the Boko Haram insurgency.
Offsetting this, Nigeria still has low and stable public and external debt ratios for its rating level, and non-oil growth is expected to remain robust. Fitch considers the authorities’ willingness to support banks to be high as demonstrated by their recent track record of support.
Fitch assigns SRFs based on each bank’s systemic importance. The most systemically important banks in Fitch’s view are FBN, Zenith, and UBA, which are assigned SRFs of B+’.
The other banks have SRFs of ‘B’. FBNH is the holding company of FBN. It’s SR of ‘5’ and SRF of ‘No Floor’ reflect Fitch’s view that while the Nigerian authorities’ propensity to support local banks is high, the same level of support would not apply to holding companies.