(This statement was made by Ficth Ratings Agency on February 15, 2017)

Lagos (INVESTADVOCATE)-Fitch Ratings has revised Nigeria-based Bank of Industry Limited’s (BOI) Outlook to Negative from Stable, while affirming the Long-Term Issuer Default Rating (IDR) at ‘B+’. This follows the recent revision of Nigeria’s Outlook to Negative. A full list of rating actions is available at the end of this rating action commentary.

KEY RATING DRIVERS
IDRS, SUPPORT RATING, SUPPORT RATING FLOOR AND NATIONAL RATINGS
BOI is a state-owned development bank and its IDRs are driven by its Support Rating Floor (SRF) of ‘B+’, which reflects a limited probability of sovereign support. The SRF factors in BOI’s 99.9% state ownership, policy role and strategic importance to Nigeria’s economic and industrial development.

It also reflects the authorities’ stronger ability to support BOI than for commercial banks, as BOI’s operations are almost entirely in local currency. BOI’s funding is long-term and almost exclusively sourced from the Central Bank of Nigeria (CBN). BOI’s Negative Outlook mirrors that on the sovereign rating.

BOI’s National Ratings reflect the bank’s creditworthiness relative to the best credits in Nigeria.

Fitch does not assign a Viability Rating to BOI as its business model is entirely dependent on the support of the state.

RATING SENSITIVITIES
IDRS, SUPPORT RATING, SUPPORT RATING FLOOR AND NATIONAL RATINGS
BOI’s IDRs, SR and SRF are sensitive to a weakening in the ability of Nigeria to support the bank, which would be indicated by a downgrade of Nigeria’s sovereign rating. The ratings could also be downgraded if Fitch’s view of the state’s willingness to support the bank changes adversely, for example in the event of a material change in the government ownership or a change in the bank’s policy role.

BOI’s National Ratings are sensitive to a change in Fitch’s opinion of BOI’s creditworthiness relative to the best credits in Nigeria.

The rating actions are as follows:

Bank of Industry
Long-Term IDR affirmed at ‘B+’, Outlook revised to Negative from Stable
Short-Term IDR affirmed at ‘B’
National Long-Term Rating affirmed at ‘AA+(nga)’
National Short-Term Rating affirmed at ‘F1+(nga)’
Support Rating affirmed at ‘4’
Support Rating Floor affirmed at ‘B+’