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Tag: S&P

  • FirstBank’s outlook now stable, says S&P

    FirstBank’s outlook now stable, says S&P

    S&P Global Ratings has revised its outlook on First Bank of Limited to stable from negative. The agency affirmed the lender’s ‘B-/B’ long- and short-term counterparty credit ratings.

    “We have raised our long-term national scale rating on FirstBank to ngBB+’ from ‘ngBB’, while we have affirmed our short-term national scale rating at ‘ngB’. Furthermore, we took the same rating actions on FirstBank’s non-operating holding company (NOHC), FBN Holdings PLC (FBNH). The rating actions reflect our view that FirstBank’s regulatory capital has and the risk of breaching regulatory requirements has thus diminished. In addition, the bank’s funding and liquidity remain credit strength,” the agency said.

    Continuing, it said though asset quality remains a weakness, in its view, it is stabilising, thanks to the steadying of the oil price and new management’s efforts. “We expect FirstBank will continue to display weaker asset quality metrics and lower profitability than other rated top-tier banks in Nigeria in 2017 due to continuing high credit costs. That said, we believe that the bank’s new leadership team will address the legacy asset quality issues and institute more prudent risk management measures,” the agency said.

    It said the lender’s cost of risk jumped to 10.4 per cent at year-end 2016 from 5.7 per cent at year-end 2015, and  nonperforming loans (NPLs) increased to 24.4 per cent for the same period compared with 18.1 per cent the prior year.

    The performance of the bank’s portfolio stemmed from high concentration and foreign currency loans (51 per cent of total loans in 2016), particularly the oil and gas-related exposures. This performance and the huge impairments have prompted the bank to recruit a new Chief Risk Officer and launch a review of its risk management process to improve loans approvals, risk monitoring, and collection.

  • S&P assigns ‘B/B’, Stable Outlook on UBA

    International Rating Agency, Standard and Poor’s (S&P) assigned  its ‘B’ long term and ‘B’ short term global scale counterparty credit ratings to the United Bank for Africa Plc (UBA).

    These ratings on the pan African financial institution, United Bank for Africa (UBA) Plc, are at par with S&P ratings on the Nigerian Sovereign. More so, S&P’s ‘B’ rating is the highest rating currently assigned to any Nigerian-based financial institution, thus reinforcing the respectable quality and strength of UBA, the third largest Nigerian-based bank by total assets, deposits and profits.

    The rating agency noted that UBA’s market position is supported by its good franchise in the corporate and retail segments in Nigeria as well as geographic diversification, with operations in nineteen African countries (Nigeria inclusive). More so, UBA is the only West-African bank with operations in the United States, in addition to its presence in the United Kingdom and France.

    Recognizing the strong profitability and capitalization of UBA, S&P noted; “We expect that UBA’s earnings will be resilient despite the economic slowdown in Nigeria. We believe the bank’s capital and earnings under our risk adjusted capital and earnings framework will remain moderate over the next 12-18 months, with its capital adequacy ratio remaining well above minimum regulatory requirements.”

  • S&P wants naira further devalued

    S&P wants naira further devalued

    •Interbank rates hit three-month high

    Ratings agency Standard & Poor’s (S&P), yesterday reinforced its call for the devaluation of the naira.

    I said this shouls happen at some stage in 2016 and in gradual adjustments, saying investors have seen a devaluation of the naira as long overdue after the economy was battered by the tumble in crude prices.

    Despite growing pressure, the government has kept the local currency at around N198 to the dollar on the official interbank market, while restricting access to dollars.

    “Their line has been to try to hold it as much as possible, and they are trying to continue that policy alongside the restrictions on imports as well,” said Ravi Bhatia, Director of Sovereign and International Public Finance at Standard & Poor’s.

    “But at some point, they are going to have to move, but I think they are going to try and do it incrementally and not in big jumps,” Bhatia said, adding he expected this to happen in one or two increments.

    Nigerian non-deliverable currency forwards, a derivative product used to hedge against future exchange rate moves, indicated markets expected the exchange rate at N265/dollar in six months time, and at N284 to the dollar in 12 months’ time.

    Brent crude accounts for about 95 per cent of foreign earnings. A devaluation would only go some way to improve the country’s situation, said Bhatia. “It will help a little, but the problems aren’t going to go away – there is no easy avenue for them really,” he said. He saw government talk of shifting to non-oil revenue as “overstated” and not easy to do. “Nigeria is going to face a very tough year in 2016.”

    Meanwhile, the overnight interbank lending rate rose sharply to five per cent, its highest since October, after the central bank drained naira liquidity through sales of (OMO) treasury bills, traders said.

    There was no official comment on the sudden rate rise, but higher rates could support the naira. The government, fighting intense pressure on the currency from the collapse in prices for Nigeria’s oil exports, has pegged the currency at around 198 per dollar on the official interbank market.

  • S&P affirms Nigeria at ‘B+’

    • Trading at interbank halted

    Standard and Poor’s Ratings Services affirmed Federal Republic of Nigeria’s long- and short-term foreign and local currency sovereign credit ratings at ‘B+’, citing lower government and external debt and ample oil reserves.

    S&P said the outlook on Nigeria is “stable”, reflecting its view that Nigeria’s non-oil economy will continue to support growth in its gross domestic product.

    Meanwhile, the Nigeria’s interbank money market yesterday, halted trading for the fourth consecutive day as commercial lenders made provision to pay for N45 billion of bonds auctioned on Wednesday, draining cash from the banking system.

    “All we have is indicative quotes of between 15-20 percent for Open Buy-Back (OBB) and overnight lending, no trading is taking place for now,” one dealer told Reuters.

    Nigeria sold the naira-denominated bonds maturing in 2020 and 2034 at an auction on Wednesday, and payment was due to be effected yesterday. There were some deals done at 15 percent on overnight placement late on Thursday, traders said. Liquidity in the interbank money market has shrunk this week, since the government directed commercial lenders to transfer government revenues to a single account with the central bank as part of a drive to fight corruption and aid transparency.

    Cash balances held with the central bank by commercial lenders further dropped to 161 billion naira on Friday from N173 billion credit on Thursday, and were likely to decline further after payment for the bond purchases, traders said.

  • Naira may be devalued, says S&P

    Naira may be devalued, says S&P

    Nigeria would have to devalue its currency at some stage, possibly by more than 15 per cent, ratings agency Standard & Poor’s said yesterday.

    It said although it saw the adjustments as likely, it said the implementation would   be gradual.

    Investors have seen a devaluation of the naira as long overdue for Nigeria, seen as Africa’s largest economy and biggest oil exporter, which has been battered by the recent tumble in crude prices.

    Following devaluations in November and February, authorities have focused recently on curbing access to hard currency on the official interbank market for importers of some goods, introducing stringent restrictions three weeks ago.

    But those measures just delayed the inevitable, said Ravi Bhatia, Director of Sovereign Ratings at Standard & Poor’s.

    “Another devaluation is inevitable… they will have no option but to devalue,” said Bhatia at a media briefing. Many investors are positioning for a devaluation of around 15 per cent. Bhatia said that sounded “reasonable”, though even more might be needed.

    Non-deliverable forwards (NDF)- derivatives used to hedge against future exchange rate moves – reflect expectations of currency weakening: six-month NDFs price the naira at N233 per dollar, some 18 per cent weaker than the central bank pegged rate of N196.95 on Tuesday.

    Yesterday, the naira hit another record low of N242 against the dollar on the parallel market operated by dealers in bureaux de change, down  0.42 per cent from Tuesday. The naira has been hitting record lows on the parallel market since the latest apex bank measures introduced three weeks ago.

    Bhatia did not expect the adjustment to be done in one go. “I think at this stage, the plan is to move in increments, not to do a ‘one big step’ devaluation like they would in the old days,” he said.

    The central bank has said it is in no mood to devalue the naira, given the risks to inflation from a weaker currency, and that it will not be focusing on the thinly traded parallel market when determining the exchange rate.

    Investors have also been nervous Nigeria might lose its place in the benchmark GBI-EM local currency debt index. Bhatia said this was a “real possibility”, although he expected the government to adjust policy enough to maintain its membership.

    “At some point they have to decide: do they want to go with their policies or do they want to stay in, and at the moment they are trying to do both, and it has worked,” said Bhatia. “But there are issues there, and it is a concern.” JPMorgan warned in June it could eject Nigeria from its benchmark index by year-end unless it restored liquidity to currency markets in a way that allowed foreign investors to transact with minimal hurdles.

  • S&P to rate banks, regional firms

    Standard & Poor’s expects to rate a number of Nigerian banks this year and is talking to some Kenyan banks and companies about future credit ratings, its managing director for sub-Saharan Africa, Konrad Reuss said.

    He said borrowers across the continent are looking to tap international capital markets following successful bond sales by African countries. A long-awaited rating for Tanzania is not likely to be assigned any time soon.

    “More Nigerian bank ratings will be coming out later this year. We are working on a number of corporates in the region,” Reuss said.

    Borrowers in frontier markets such as Africa have turned to capital markets as aid funding dries up and monetary easing across the western world keeps interest rates low.

    A flood of new issues from sub-Saharan Africa in the past couple of years includes a recent debut dollar bond from Nigerian bank Diamond Bank, First Bank of Nigeria is holding a bond road show this week, according to Thomson Reuters service IFR.

    These bonds follow sovereign dollar debt issuance from Nigeria, which analysts say helped to familiarise investors with the West African economy. Kenya issued a well-received $2 billion bond last month, its first in international markets.

    “We are reaching out to Kenya. “On the back of a very successful sovereign bond, a benchmark has been set,”Reuss said, referring to plans to discuss ratings with local banks and corporates in the East African country.

    Tanzania, which also said it plans to launch a debut Eurobond, has not yet gained a rating. “Time and time again, the government has made announcements, time and time again those plans were delayed,” Reuss said, adding that any ratings timescale was difficult to predict “because of the many delays that we have seen so far.”

  • UK loses top AAA credit rating

    UK loses top AAA credit rating

    The United Kingdom has lost its top AAA credit rating for the first time since 1978 on expectations that growth will “remain sluggish over the next few years.”

    BBC says the ratings agency Moody’s became the first to cut the UK from its highest rating, to Aa1.

    Moody’s said the government’s debt reduction programme faced significant “challenges” ahead.

    Chancellor George Osborne said the decision was “a stark reminder of the debt problems facing our country.”

    “Far from weakening our resolve to deliver our economic recovery plan, this decision redoubles it,” he added. “We will go on delivering the plan that has cut the deficit by a quarter.”

    But the BBC says Mr. Osborne now risks being dubbed the “downgrade chancellor.”

    “Worse could follow if the Budget shows borrowing rising… but for most people, what will matter is not credit ratings or statistics but higher fuel, food and other prices and if interest rates go up,” he added.

    The UK has had a top AAA credit rating since 1978 from both Moody’s and S&P.

    Shadow chancellor Ed Balls said the decision was a “humiliating blow to a prime minister and chancellor who said keeping our AAA rating was the test of their economic and political credibility.”

     

  • S&P raises First, GTB, Zenith banks’ ratings

    Standard & Poor’s (S&P) has raised the long-term counterparty credit ratings on First Bank of Nigeria Plc , Zenith Bank Plc, and Guaranty Trust Bank Plc to ‘BB-’ from ‘B+’.

    The firm said also raised the long-term Nigeria national scale ratings on the three lenders to ‘ngAA-’ from ‘ngA+’, adding that the stable outlook on the trio reflects that on the sovereign.

    The firm said the banks’ business and financial profiles will remain relatively unchanged over the next 12 months. According to Reuters, the ‘B’ short-term counterparty credit ratings on all three banks were affirmed and their outlook remained stable.

    S&P said the rating actions on FirstBank, Zenith, and GTB follow the upgrade of the Federal Republic of Nigeria rating on improved fiscal and external buffers and strong growth. It said that the sovereign upgrade reflects its view of an improvement in the government’s fiscal buffer and external position, as well as ongoing reform momentum.

    “We believe these factors will benefit the three rated Nigerian banks through the improved quality of their large exposure to the sovereign treasury bills and other government or government-related debt account for about 25 per cent to 30 per cent of the banks’ total assets. There is also expected strong economic growth, especially in the non-oil sector,” it said.

    The S&P said it does not rate Nigerian banks above the foreign currency sovereign credit ratings because of the direct and indirect influence the sovereign in distress would have on a bank’s operations, including its ability to service foreign currency obligations. “The long-term counterparty credit rating on Zenith remains constrained by the ‘BB-’ foreign currency sovereign credit rating on Nigeria. The ratings on FirstBank and GTB reflect their SACPs of ‘bb-’,” it added.

    According to S&P, the stable outlook on FirstBank reflects the stable economic environment, adding that  the bank’s business and financial profiles will remain relatively unchanged over the next 12 months. It expects the bank to retain its strong market position as Nigerian banking sector leader, with relatively stable revenues and moderate geographic diversification.

    The bank’s capitalisation, it said, should remain in the five to six per cent range under S&P’s risk-adjusted capital (RAC) methodology, but there could be downward ratings pressure if loans grow faster than we currently anticipate.

    “In our view, positive economic prospects should keep asset quality and loss experience at currently good levels, although a focus on lending to midsize companies may pressure this in the next 12 to 18 months,” it said.

    On GTB, it said the stable outlook reflects the stable economic environment, stressing that the bank’s business and financial profiles will remain relatively unchanged over the next 12 months. “In our view, the positive economic prospects in Nigeria will further support GTB’s business relationships and earning capacity,” it said.

    It said the stable outlook on Zenith reflects that on the sovereign, adding that the lender’s business and financial profile will also remain relatively unchanged over the next 12 months. “We anticipate that the positive economic prospects in Nigeria will support Zenith’s financial performance. We would raise the ratings on Zenith if we were to raise the ratings on the sovereign,” it said.

    The agency said a downgrade of the sovereign rating would trigger a downgrade of the bank.