Moody’s Investors Service has assigned first-time ratings to Zenith Bank Plc (Zenith), Guaranty Trust Bank Plc (GTBank), United Bank for Africa Plc (UBA) and First Bank of Nigeria Limited (FBN), the four leading Nigerian banks that account for approximately 48% of the country’s banking assets.
For Zenith and GTBank, Moody’s assigned B1 local-currency deposit and issuer ratings with a stable outlook, aligned with the ratings of the Nigerian government.
Both banks reach these rating levels solely based on their standalone strength, as indicated by the Baseline Credit Assessments (BCA) of B1 assigned to the two banks, Moody’s highest in Nigeria.
The primary drivers for Zenith and GTBank’s BCAs are their robust loss-absorbing buffers, low levels of non-performing loans and their resilient liquidity profiles.
Although Zenith and GTBank are systemically important and we attach a high probability of government support in case of needs, their ratings do not benefit from any uplift because their standalone BCAs are already at the government’s rating level. Moody’s also assigned a Counterparty Risk Assessment (CRA) of Ba3(cr) to both banks.
For UBA, Moody’s has assigned B1 local currency deposit and issuer ratings, with a stable outlook. These ratings are underpinned by a standalone BCA of b2 and one notch of uplift based on Moody’s view of a high likelihood of government support, owing to UBA’s status as a systemically important bank.
UBA’s standalone BCA of b2 ranks second highest in Moody’s Nigerian banking universe, reflecting the balance between the bank’s resilient asset quality profile, which is more geographically diversified than most of its peers, and capitalization levels that are slightly below the first tier bank peer average. Moody’s also assigned a CRA of B1(cr).
For FBN, Moody’s has assigned B2 local and foreign-currency issuer and deposit ratings, with a negative outlook. These ratings are underpinned by a standalone BCA of b3, which is driven by the bank’s strong pre-provision profitability and solid local currency funding profile, moderated by the bank’s relatively weak loan book and high provisioning costs.
Moody’s views FBN as a systemically important bank and its ratings benefit from one notch of uplift due to our high government support assumptions. FBN was also assigned a CRA of B1(cr).
In addition to the bank specific considerations, an overarching credit factor behind the bank ratings assigned today is the currently challenging Nigerian operating environment, as the oil and gas dependent economy continues to experience a period of weak economic growth and volatile monetary conditions.
In this context, the key credit differentiation factors relate primarily to the relative ability of individual banks to withstand a prolonged difficult environment.