Fitch Ratings, an international rating agency, Monday affirmed its Long-term Issuer Default Ratings (IDR) on eight Nigerian banks, even as it downgraded Union Bank of Nigeria Plc (UBN).

A statement from Fitch listed the banks whose ratings it maintained to include Zenith Bank Plc, First Bank of Nigeria Limited, United Bank for Africa Plc (UBA), Guaranty Trust Bank Plc (GTB), Access Bank Plc, Diamond Bank Plc, Fidelity Bank Plc and the Long-term National Ratings of Stanbic IBTC Bank Plc.

Simultaneously, the agency said it downgraded Union Bank’s Long-term IDR due to a change in the bank’s systemic importance relative to its peers. UBN’s Support Rating Floor (SRF) was therefore revised to ‘B’ from ‘B+’ due to its perceived lower systemic importance post restructuring. As a result of this, the banks National Rating was downgraded to ‘BBB+(nga)’ from ‘A+(nga)’.

At the same time, Union’s Viability Rating (VR) has been upgraded to ‘b-‘ from ‘ccc’ due to its improved financial position with on-going restructuring.

Access’s VR has been upgraded to ‘b’ from ‘b-‘ given its larger franchise, improving performance and commitment to maintaining healthy Fitch core capital (FCC) ratios over the medium term and despite its high cost to income ratio as it integrates a large acquisition. As a consequence, the bank’s Long-term IDR is now driven by its VR of ‘b’ rather than its SRF of ‘B’,” it added.

The Long-term IDRs of First Bank, UBA, Diamond, Fidelity and Union, according to Fitch, were driven by the perceived level of support from the Nigerian authorities if required.

Furthermore, it pointed out that Zenith, GTB and Access had IDRs that were driven by their intrinsic strengths as defined by their VRs.

Zenith and GTB have higher VRs relative to peers, given their strong franchises and track record of financial performance through the cycle. All the IDRs have Stable Outlooks. Fitch considers the authorities’ willingness to support to be high, but its ability to support is constrained by Nigeria’s sovereign IDR of ‘BB-‘. Support for the banking sector by the Nigerian authorities has been clearly demonstrated, most recently since the 2008/2009 banking crisis.

”Fitch assigns SRFs based on its opinion of each bank’s systemic importance (generally given their size and franchise). SRFs are derived from Support Ratings. All the banks (apart from SIBTC) have Support Ratings of ‘4’ which indicates a minimum SRF of ‘B’,” it added.

Source: Thisday (by Obinna Chima and Nume Horsfall)