Fitch Ratings has downgraded First Bank of Nigeria Ltd's (FBN) and United Bank for Africa's (UBA) the Long-Term Foreign Currency Issuer Default Ratings (IDRs) to 'B' from 'B+'. The Outlooks are Stable. The agency has also downgraded the National Long-Term Rating of FBN Holdings Plc (FBNH), the parent holding company of FBN, to 'BBB+(nga)' from 'A(nga)'.
Fitch has at the same time affirmed the IDRs of eight other Nigerian commercial banks and affirmed the Viability Ratings (VR) of all the banks. The Outlook on the Long-Term Foreign Currency IDR of one of the banks, Guaranty Trust Bank (GTB), has been revised to Stable from Negative due to continuing strong earnings and stronger-than-expected liquidity.
The rating actions follow the downgrade of Nigeria's sovereign ratings on 23 June 2016.
KEY RATING DRIVERS
IDRS, SUPPORT RATINGS AND SUPPORT RATING FLOORS (SRFs)
The IDRs of UBA, Access Bank (Access) and Wema Bank (Wema) are driven by both their standalone strengths, reflected in their VRs, and by the likelihood of sovereign support, reflected in their SRFs. Their VRs and SRFs are at the same level.
The IDRs of FBN, Diamond Bank (Diamond), Fidelity Bank (Fidelity), Union Bank (Union) and First City Monument Bank (FCMB) are driven by their SRFs.
Fitch has revised the SRFs to 'B' from 'B+' for the systemically important banks, FBN, UBA, Zenith and GTB following the downgrade of Nigeria's sovereign ratings. As a result, both FBN's and UBA's IDRs have been downgraded to 'B' from 'B+'. The IDRs of both Zenith and GTB are affirmed at 'B+' and are now driven by their respective VRs of 'b+'.
The systemically important banks' SRFs remain a notch below the sovereign rating, reflecting the sovereign's weak foreign currency position. Fitch believes that the willingness of the Nigerian authorities to support domestic banks continues to be high (as demonstrated in the past). However, the state's ability to provide support, particularly in foreign currency, is weaker due to falling oil prices eroding Nigeria's foreign exchange reserves and foreign currency revenues.
All other banks', apart from Wema's, SRFs have been affirmed at 'B'. Wema's SRF is affirmed at 'B-', reflecting Fitch's view of the bank's lower systemic importance. Fitch has affirmed the IDRs of all of these banks..
All banks apart from Wema have Support Ratings (SR) of '4' indicating a limited probability of external support. Wema's SR of '5' reflects Fitch's view that external support is possible but cannot be relied upon.
FBNH is the holding company of FBN. Its SR of '5' and SRF of 'No Floor' reflect Fitch's view that while the Nigerian authorities' propensity to support local banks is high, we would not expect the same level of support to apply to holding companies. FBNH's IDR of 'B' is driven by the holding company's 'b' VR. The latter is aligned with the VR of FBNH's main operating subsidiary, FBN.
