The ratings of Globus Bank Limited (Globus bank) are underpinned by its strong capitalisation, low-risk level, highly liquid balance sheet, as well as it’s a limited track record.
Globus is a new entrant in the Nigerian commercial banking space, with a track record of fewer than two years. The bank ranks among the tier 3 banks in Nigeria and controls an estimated market share of 0.4% and 0.3% in assets and deposits respectively at FY20.
Globus’ competitive position is constrained by its evolving brand franchise, short track record, and limited local geographical diversification, being a regional licenced bank. As a new entrant, Globus’ customer base is concentrated, as such, the risk position was high in terms of the twenty largest obligors and depositors at FY20.
Capitalisation is considered strong and a ratings strength. Given Globus’ new operations and its moderate risk asset level, capitalisation metrics was at a satisfactory level at FY20, as GCR core capital ratio closed at a high level of 43.6%.
Looking ahead, we expect the bank’s capitalisation metrics to remain within moderate range over the next 12 to 18 months despite risk asset growth and expanded operation weighing down the capitalisation assessment. GCR is also cognisant of the bank’s significant exposures to market risk in view of the substantial (43%) market-sensitive income realised in FY20.
The risk position is sound and well contained, evidenced by the nil non-performing loan (NPL) at FY20. This position rides on the back of the bank’s short track, with most part of the loan book yet to reach maturity. Credit losses is also minimal at 1.9% at FY20 and compare favourably with the industry average of about 3%.
Expectedly, concentration by the obligor is considered high, with the twenty largest exposures accounting for about 70% of the loan book at FY20. We anticipate a more diversified loan book over the short to medium term as the bank continues to expand its lending activities.
In addition, foreign currency (FCY) risk is considered minimal, with FCY loans constituting 5% of the loan portfolio at FY20, well below the industry average 35%. Related party exposure constituted less than 10% of the loan book at FY20.
The funding and liquidity position is assessed at an intermediate level. Globus is predominantly funded through customer deposits (c.65.7% of the funding base at FY20).
The deposit book, which grew to N88.6bn at FY20 from N4.5bn in the prior year, reflected a good blend of term deposits (41%) and the low-cost saving and current accounts (47%), having the average cost of fund ended the year at a moderate 3.9%.
Liquidity is good, evidenced by the highly liquid nature of the balance sheet at FY20, as GCR liquid assets covered total wholesale funding moderately (23.7x), while the GCR calculated liquid asset to total customer deposits ratio stood at 23%.
Although the matching of assets and liabilities reflects a liquidity gap of N27.7bn in the ‘less than one-month’ band, the behavioural pattern seen in the industry over time indicates that a sizeable portion is usually rolled over at maturity.
The Stable Outlook reflects GCR’s expectations that Globus’ capitalisation metrics would remain strong despite its increasing risk assets. Asset quality metrics are anticipated to be maintained at a sound level, with a reduction in concentration by the obligor. We also believe that funding and liquidity will remain stable and adequate.
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