Agusto & Co Rates Rand Merchant Bank ‘Aa-’


Agusto & Co. Limited has assigned an “Aa-” rating to Rand Merchant Bank Nigeria Limited.

According to a statement made available to THISDAY the rating assigned to Rand Merchant Bank reflects the bank’s good profitability, good asset quality, good capitalisation and good liquidity, with operations driven by an experienced management team.

The statement added: “Considering RMBN’s improved earnings and strengthened profitability profile, as well as its good liquidity track record, we hereby upgrade the Bank’s rating to ‘Aa-’, reflective of a financial institution of very good financial condition and strong capacity to meet its obligations.

“The bank’s profile is further buoyed by demonstrated support from its parent company, FirstRand Limited in various capacities such as, spanning risk management, customer referrals and liability generation.

“The bank’s rating is however constrained by lingering concentration risks in its loan portfolio and its funding profile, as well as the lull in the macroeconomic environment in which it operates.”

According to the rating agency, following Rand Merchant Bank’s return to profitability in 2017, the bank’s profit further strengthened in 2018, with a pre-tax profit of approximately N10 billion, 37.2 per cent higher than the prior year and translating to returns on average assets and average equity of 5.3 per cent and 29.7 per cent respectively.

The statement further explained: “Profit was upheld by expanding earning streams which include its core lending business, investments in government securities, transaction-tied advisory, as well as foreign exchange trading which buoyed contributions of the bank’s global markets business division.

“Overall, profitability stood good despite interest expense on deposits and borrowings accounting for 67.8 per cent of interest income, given the funding restrictions of the merchant banking space and concurrent high cost of funds from rate-sensitive corporates.”

“Merchant banks re-emerged with a review of regulatory guidelines governing the Nigerian banking industry in 2010.”