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.”
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. Notably, the well capitalized position of UBA reflects its
strong profitability as well as the Bank’s sound and prudent risk
management practice. S&P assesses UBA’s risk position as adequate and
posits that the ratings of ‘B’ reflects its expectation that the group will
exhibit broadly stable asset quality in the next 12 months. The global rating
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.
United
Bank for Africa Plc is a leading Pan-African financial institution, offering
banking services to more than fourteen million customers across over 1,000
business offices and customer touch points in 19 African countries. With
presence in New York, London and Paris, UBA is connecting people and businesses
across Africa through retail, commercial and corporate banking, innovative
cross border payments and remittances, trade finance and ancillary banking
services
Tags
Business