Fitch Ratings has affirmed the Long Term Issuer Default rating of United Bank for Africa Plc at “B”, with a stable outlook.
According to Fitch, the rating of UBA is driven by the standalone creditworthiness of the bank, as defined by its viability rating, which is constrained by Nigeria’s operating environment.
In the report issued on Wednesday, Fitch highlighted the lender’s systemic importance, franchise and internationalisation across 19 African countries.
Assessing the bank’s loan portfolio, Fitch noted that, “Corporate lending dominates the loan book, but much of it is collateralised. UBA’s exposure to the oil and gas sector represents 20 per cent of total loans, lower than the 30 per cent sector average. This is a reflection of the diversified structure of UBA’s credit portfolio and an apparent evidence of the sound risk management of the bank.”
Fitch noted the improved foreign currency liquidity of UBA, following the issuance of a $500m Eurobond in 2017 and also affirmed the strength of the bank’s local currency funding profile.
The group is largely funded by historically stable deposits and UBA’s strategy is to continue to expand its low-cost retail deposit base, according to Fitch.
According to the rating agency, UBA’s retail deposit is higher than the sector average and local currency liquidity ratios were high.
It said, “We reckoned UBA maintained a liquidity ratio of 40 per cent through the first nine months of 2017, a notable buffer over the regulatory requirement of 30 per cent, despite the stressed liquidity in the Nigerian banking system within the period.”
As regards capitalisation, Fitch views the bank’s capital ratios to be in line with other large Nigerian banks and noted that the National Ratings of UBA Plc reflected its creditworthiness relative to Nigeria’s best credit and to peers operating in Nigeria.”