Fitch ratings has upgraded United Bank for Africa Plc Long Term Issuer Default Rating (IDR) to ‘B+’, with stable outlook.
The global rating agency also upgraded the Viability Rating of the pan-African bank to “b+” from “b”.
The rating upgrade came on the back of consistent improvement in financial performance metrics, funding and liquidity.
According to Fitch, UBA’s IDRs are driven by its intrinsic creditworthiness, as defined by its viability rating (VR). Like all Nigerian banks, UBA’s VR is constrained by the operating environment in Nigeria (B+/Stable) where the fragile economic recovery restrains banks’ growth prospects and asset quality.
The VR reflects UBA’s position as one of Nigeria’s largest banks, as well as its sound financial metrics and reasonable capital buffers.
It controls an overall market share in Nigeria of approximately 10 per cent and its well-established franchise is a rating strength.
UBA is also Nigeria’s most international bank, operating in 20 other sub-Saharan African
Its objective is to operate as a pan-African commercial bank.
“Our assessment is that geographic diversification is credit positive because it provides growth opportunities and can reduce exposure to Nigeria’s cyclical economic growth trends,” Fitch explained.
Further discussing the diversification of UBA, the rating agency noted that the bank’s international subsidiaries contributed 40 per cent of the Group’s earnings in first half of 2018, even as Nigerian assets dominate the group, representing around 70 per cent of consolidated assets.
In assessing the Group’s funding and liquidity profile, Fitch noted that “UBA’s local currency funding profile is a rating strength. Its loans/deposits ratio (57% at end-1H18) is low compared with peers (69%).
“The deposit base is well diversified by single customer and retail deposits represent approximately one-third of customer deposits, which is higher than the average for rated peers.
“UBA’s digital offerings continue to attract deposit inflows. Local currency liquidity ratios are comfortable and the issue of a USD500 million senior medium term bond on the international capital markets in June 2017 eased pressure on the group’s overall foreign currency liquidity position.”