Fitch Upgrades First Bank of Nigeria’s Subordinated Notes to ‘CCC+’

Fitch Upgrades First Bank of Nigeria's Subordinated Notes to 'CCC+'

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 Fitch Ratings has upgraded First Bank of Nigeria’s (FBN) subordinated notes to ‘CCC+’/’RR5’ from ‘CCC’/’RR5’ and removed them from Rating Watch Positive (RWP). The notes were issued through FBN Finance Company BV, a special purpose vehicle, which was established to provide funding for the bank. FBN’s other ratings are unaffected.

The upgrade follows the introduction of ‘+’ and ‘-‘ modifiers to ‘CCC’ Long-Term Issuer Default Ratings (and long-term debt ratings), as per Fitch’s Bank Rating Criteria published on 23 March 2018. Fitch placed the subordinated notes’ ‘CCC’/’RR5’ rating on RWP following the publication of the Global Bank Rating Criteria Exposure Draft on 12 December 2017, which proposed the introduction of such modifiers.

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FBN’s subordinated notes are rated one notch below its ‘b-‘ Viability Rating (VR). This reflects zero notches for non-performance risk relative to the VR and one notch for loss severity. The one notch for loss severity reflects Fitch’s view of below-average recovery prospects, as defined by the notes’ recovery rating of ‘RR5’.

As the notes are notched down from FBN’s VR, their rating is primarily sensitive to a change in the VR. The notes’ rating is also sensitive to a change in notching due to a revision in Fitch’s assessment of the probability of the notes’ non-performance risk relative to the risk captured in FBN’s VR, or in its assessment of loss severity in case of non-performance.

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