International Rating Agency, Standard and Poorâ€™s (S&P), assigned its â€˜Bâ€™ long term and â€˜Bâ€™ 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 UBAâ€™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: â€œWe expect that UBAâ€™s earnings will be resilient despite the economic slowdown in Nigeria. We believe the bankâ€™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.â€
UBAâ€™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 UBAâ€™s risk position as adequate and posits that the ratings of â€˜Bâ€™ reflect its expectation that the group will exhibit broadly stable asset quality in the next 12 months. The global rating agency anticipated that UBAâ€™s credit losses will decline to about one per cent in 2017-2018.
Reflecting UBAâ€™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, UBAâ€™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.
â€œS&P considers the bankâ€™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,â€ it added.