International Rating Agency, Standard and Poor’s (S&P), assigned its ‘B’ long term and ‘B’ short term global scale counterparty credit ratings on the United Bank for Africa Plc (UBA).
These ratings on the pan-African financial institution were at par with S&P ratings on the Nigerian Sovereign.
The rating agency noted that UBA’s market position was supported by its good franchise in the corporate and retail segments in Nigeria as well as geographic diversification, with operations in 19 African countries (Nigeria inclusive).
S&P in a statement noted: “We expect that UBA’s earnings will be resilient despite the economic slowdown in Nigeria. We believe the bank’s capital and earnings under our risk adjusted capital and earnings framework will remain moderate over the next 12-18 months, with its capital adequacy ratio remaining well above minimum regulatory requirements.”
UBA’s capital adequacy ratio was 19.7 per cent at year-end 2016, which is well above the regulatory minimum of 15 per cent, and had been predicted to remain stable over the next 12-18 months.
The bank had explained that its well capitalised position was a reflection of its strong profitability as well as its sound and prudent risk management practice.
S&P assessed UBA’s risk position as adequate and posits that the ratings of ‘B’ reflect its expectation that the group will exhibit broadly stable asset quality in the next 12 months. The global rating agency anticipated that UBA’s credit losses will decline to about one per cent in 2017-2018.
Reflecting UBA’s continued market share gain in low cost, stable deposits, which account for 79 per cent of total customer deposits as at 31 December, 2016, UBA’s funding and liquidity continue to wax stronger, as reflected in the average liquidity ratio of 42 per cent in 2016, amidst the tight market conditions in Nigeria.
“S&P considers the bank’s funding to be above average and its liquidity as adequate, owing to its stable and relatively low-cost, retail-deposit-based funding profile. Despite tightening monetary policy in Nigeria in 2015-2016, the bank has been able to maintain a stable cost of funding at about 3.7% as of December 31, 2016,” it added.