UBA Plc gets S&P ‘B/B’ ratings — same as Nigeria

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

These ratings are at par with S&P ratings on the Nigerian sovereign, while ‘B’ rating is the highest currently assigned to any Nigerian-based financial institution.

UBA is the third largest Nigerian-based bank by total assets, deposits and profits.

S&P says 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)”.

UBA is the only West African bank with operations in the US — in addition to its presence in the UK and France.

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.

“UBA’s capital adequacy ratio was 19.7% at year-end 2016, which is well above the regulatory minimum of 15%, and we believe it will remain stable over the next 12-18 months.”

UBA’s capitalisation position is seen as reflecting its profitability as well as the bank’s risk management practice.

S&P assessed UBA’s risk position as adequate and concluded that the ratings of ‘B’ reflects its expectation that the group will exhibit broadly stable asset quality in the next 12 months.

The agency anticipates that UBA’s credit losses will decline to about 1.0% in 2017-2018.

Reflecting UBA’s continued market share gain in low cost, stable deposits, which account for 79% of total customer deposits as at 31 December, 2016, UBA’s funding and liquidity continue to wax stronger, as reflected in the average liquidity ratio of 42% in 2016, amidst the tight market conditions in Nigeria. S&P considers the bank’s funding to be above average and its liquidity as adequate, owing to its stable and relatively low-cost, retail-deposit-based funding profile.

Despite tightening monetary policy in Nigeria in 2015-2016, the bank has been able to maintain a stable cost of funding at about 3.7% as of December 31, 2016”. The Group reported a net stable funding ratio of 143% as of the same date and exhibits one of the lowest levels of loan leverage among Nigerian peers. Broad liquid assets covered short term wholesale funding about 4x as of the same date.

UBA offers banking services to more than 14 million customers across over 1,000 business offices and customer touch points in 19 African countries.