NewsmakersNG
http://www.newsmakersng.com/2017/11/11/bad-news-for-nigeria-as-moodys-downgrades-first-bank-access-bank-gtb-others/
Segun Atanda/

Things are not looking up for Nigerian banks in the International financial market, says the latest report from Moody’s.

Access Bank Plc, Guaranty Trust Bank Plc (GTB), First Bank of Nigeria Limited (FBN) and Union Bank of Nigeria Plc featured prominently in a statement issued by Moody’s Investors Service yesterday following its latest Global Credit Research.

Moody’s, a leading provider of credit ratings, research, and risk analysis, explained that weakening government capacity to support banks in distress led to the downgrade of the Nigerian banks.

According to Moody’s, weaker credit profile of the Nigerian government exerts pressure on banks.

“The secondary driver of today’s rating action is the Nigerian banks’ significant holdings of government securities, which generally exceed 100% of their core capital, linking their credit profile to that of the government. In view of the correlation between sovereign and bank credit risk, the banks’ standalone credit profiles and ratings are constrained by the rating of the government,” says the statement obtained by NewsmakersNG.

In its rating of FBN, Moody’s says: “The outlook on the deposit and issuer ratings remains negative. The affirmations reflect (1) FBN’s still weak asset risk metrics, with non-performing loans (NPLs) estimated at over 20% of gross loans as of June 2017, albeit on a declining trend, (2) still tight – although improving – foreign currency liquidity, counterbalanced by (3) the bank’s resilient pre-provision profitability…”

Last year, the Asset Management Corporation of Nigeria (AMCON) disclosed that it had 217 chronic debtors in its books, which included companies and individuals owing banks huge debts.

AMCON then published on its website 100 of the 217 chronic debtors, as directed by the Central Bank of Nigeria (CBN). The 100 debtors owe N953.43billion.

Moody’s statement further says: “Moody’s Investors Service (Moody’s) has today downgraded to B2 from B1 the long-term local currency deposit and issuer ratings of four Nigerian banks…and the long-term local and foreign currency issuer ratings of Bank of Industry, a Nigerian development bank…

“Today’s rating action follows Moody’s downgrade of Nigeria’s government bond ratings to B2, with a stable outlook, from B1, with stable outlook, on 7 November 2017…and reflects (1) the government’s reduced capacity to provide support to Nigerian banks in times of stress and (2) the banks’ significant holdings of government securities linking their credit profiles to that of the government. The decision to downgrade banks’ long-term foreign currency deposit ratings follows the downgrade of the relevant country ceiling for foreign currency deposits to B3 from B2.”

Moody’s also downgraded to B3 from B2 the long-term foreign currency deposit ratings of Access and GTB, as well as those of Union Bank, and FBN. Concurrently, Moody’s downgraded the baseline credit assessment (BCAs) of GTB to b2 from b1.

Bankers told NewsmakersNG today that the implications of these downgrades is that banks would find it more difficult to raise foreign funding which, by extension, could affect corporate businesses that depend on them for long term credit.

It also means those with bond would have their ratings downgraded, which negatively impacts yield.

One of the experts told NewsmakersNG: “In one word, if GTB for example wants to borrow $100million from Citibank before the downgrade, it could have accessed it at say 5% per annum, but with the downgrade, which means higher risk, Citibank may not want to lend the money at less than 6 or 7%.

“GTB, Zenith, Access and UBA currently have Eurobonds in excess of $2billion, subscribed by mostly foreign based institutional investors. Same goes for government bond held by private individuals.”

“I expected one of the banks not to...http://www.newsmakersng.com/2017/11/11/bad-news-for-nigeria-as-moodys-downgrades-first-bank-access-bank-gtb-others/

Who is Moody? Is he related to Fulani empire?

Osinbajo that's been working on the ease of doing business in Nigeria should pedal up o.

I wonder if they've had any relative comparison on the exorbitant interest on loans Nigerian banks offers it's customers/subscribers

Nigeria and it's citizens is an unlucky pair