Fitch affirms UBA’s ‘B’ rating with stable outlook, credit worthiness

Fitch, one of the foremost global credit rating agencies, has affirmed the Long Term Issuer Default rating of the UBA Plc 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 on Wednesday, 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 (i.e Non Performing Loan Ratio) remains relatively low around 4%.

Assessing the Bank’s loan portfolio, Fitch notes; “Corporate lending dominates the loan book, but much of it is collateralized.

UBA’s exposure to the oil & gas sector represents 20% of total loans, lower than the 30% sector average.” This is reflection of the diversified structure of UBA’s credit portfolio and an apparent evidence of the sound risk management of the Bank.

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.

On 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.

United Bank for Africa Plc is a leading Pan-African financial institution, offering banking services to more than fourteen million customers across over 1,000 business offices and customer touch points in 19 African countries.

With presence in New York, London and Paris, UBA is connecting people and businesses across Africa through retail, commercial and corporate banking, innovative cross border payments and remittances, trade finance and ancillary banking services.

Whilst the bank await relevant approvals for the publication of its 2017 financial year end results, the performance in the first three quarters of the year was quite impressive, growing gross earnings by 26% year-on-year to N334 billion and a sterling 33% growth in profit before tax to N78 billion, compared to N59 billion in the corresponding period of 2016.

At a season when peer banks shrink loan portfolio and balance sheet due to the sparse system liquidity, UBA grew loans and total assets by 6% and 8% respectively within the first three quarters of 2017.