GT Bank, UBA get thumps-up over impressive earnings, asset quality

By Odunewu Segun

One of the world’s leading global rating agencies, Fitch Rating has again reviewed Guaranty Trust Bank (GTBank) Plc and United Bank for Africa (UBA) Plc, upgrading its ratings for the two Nigerian leading banks, citing strong earnings and asset quality.

Fitch, in its latest Rating Report, indicated that GTBank remains one of the top two rated banks in Nigeria. Fitch revised the outlook on the GTBank’s long-term issuer default rating (IDR) from negative to stable, citing the bank’s continuing strong earnings, and stronger-than-expected liquidity as the reasons for the revised outlook.

It also affirmed GTBank’s long-term issuer default rating (IDR) at ‘B+’ with a stable outlook and short-term IDR at ‘B’. In addition, the agency affirmed the bank’s viability rating (VR) at ‘b+’, support rating (SR) at ‘4’ and GTB Finance BV’s senior notes, guaranteed by GTBank was affirmed at ‘B+’/’RR4′. Fitch revised the bank’s support rating floor (SRF) to ‘B’ from ‘B+’ as a result of the sovereign’s weak foreign currency position.

The IDR rating and outlook reflects Fitch’s opinion of the bank’s relative ability to meet its financial commitments and GTBank’s rating of B+ remains the highest credit rating in the industry. The viability rating (VR), which is a component of the IDR measures the bank’s intrinsic credit quality and capacity to maintain ongoing operations and to avoid failure.

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The report showed that despite the tough operating environment, GTBank remained strong and stable as indicated by its profitability track record, healthy liquidity state, strong asset quality and capital ratios.

Also, Fitch affirmed UBA’s viability rating at “B” as the pan-African banking group continues to sustain its benchmark asset quality and strong profitability amidst industry and macroeconomic challenges. UBA is one of the few banks with strong risk management framework, which has helped keep non-performing loans ratio at a moderate level of 1.74 per cent as at the end of March 2016, as against industry average of more than six per cent, as reported by Fitch.

Fitch also upgraded UBA’s outlook to stable from negative, thus reinforcing the strong outlook on the bank, especially as its diversified network across eighteen other African countries makes it relatively immune against the potential cyclical volatilities in any of its country of operations.