Fitch Ratings has affirmed Stanbic Bank Uganda Limited's Long-Term Issuer Default Rating (IDR) at 'B+'. This follows the downgrade of the bank's South Africa-based ultimate parent Standard Bank Group Limited (SBG: BB-/Negative) on 27 November 2020 (see Fitch Downgrades South African Banks to 'BB-'/Negative on Sovereign Downgrade). The Outlook remains Negative. SBU's Viability Rating (VR) is unaffected by this rating action.
KEY RATING DRIVERS
IDRS, SUPPORT RATING AND NATIONAL RATINGS
SBU's IDRs and National Ratings are driven by a limited probability of support from SBG, if required, as reflected in the bank's '4' Support Rating (SR). SBG's ability to provide support is underpinned by the subsidiary's small size, representing just 1% of consolidated group assets at end-2019. SBU's 'B+' Long-Term IDR is one notch below that of SBG, reflecting the cross-border nature of the parent-subsidiary relationship. The Negative Outlook on SBU's Long-Term IDR mirrors that on SBG.
Fitch's view of support also considers the high propensity of SBG to provide support to SBU given its indirect majority ownership (80%), common branding, reputational risks and the high level of management and operational integration, including the use of common products, risk policies and processes. Despite operating outside of the parent's core market of South Africa, Fitch regards SBU as a strategically important subsidiary due to its role in SBG's pan-African strategy and the bank's systemic importance in Uganda. Our view of support also considers a public commitment by SBG to ensure that its subsidiaries, including SBU, meet local capital requirements.
SBU's National Ratings reflect Fitch's view of the bank's creditworthiness relative to that of other issuers within Uganda. The Stable Outlook on the National Long-Term Rating reflects our view that SBU's creditworthiness compared with other domestic issuers' is unlikely to change over a one- to two-year period.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
- SBU's Long-Term IDR is sensitive to a weakening in SBG's ability or propensity to provide support. Reduced ability to support would most likely result from a downgrade of SBG's Long-Term IDR.
- The rating is also sensitive to a downward revision of Uganda's Country Ceiling of 'B+', which captures Fitch's view of transfer and convertibility risk, most likely to be triggered by a downgrade of Uganda's ratings.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
- An upgrade of SBU's Long-Term IDR would require both an upgrade of SBG's Long-Term IDR and an upward revision of Uganda's Country Ceiling.
