Fitch Affirms Union Bank’s Stable Rating

Fitch Downgrades Nigeria’s Credit Rating To Near Junk Status
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Fitch Ratings has affirmed Union Bank of Nigeria’s long-term issuer default rating at ‘B- with a stable outlook. The bank’s long term national rating was also upgraded from ‘BBB- (nga)’ to ‘BBB (nga), with its short-term national rating upgraded to ‘F2 (nga)’ from ‘F3 (nga)’.

According to the rating agency, the upgrade to Union Bank’s national ratings reflects the bank’s increased creditworthiness relative to other issuers in Nigeria and the relative strength of its funding and liquidity profile.

“Union’s Long-Term IDR is driven by its intrinsic creditworthiness, as defined by its ‘b-’ Viability Rating (VR)…The VR also reflects Union’s concentration and sensitivity to Nigerian operating environment risks and moderate franchise. This is balanced by a stable funding and liquidity profile and adequate profitability for the bank’s risk profile. The Stable Outlook reflects Fitch’s view that risks to Union’s credit profile are captured at the current rating level, with sufficient headroom, under our base case, to absorb the fallout from operating environment pressures,” Fitch stated.

The agency noted that Union (Bank’s national ratings reflected its creditworthiness relative to other issuers in Nigeria and were driven by its standalone strength.

According to the report, the upgrade of Union Bank’s long-term national rating reflected its increased creditworthiness relative to other Nigerian issuers while its short-term national rating was the higher of the two possible options for a ‘BBB (nga)’ long-term national rating under Fitch’s criteria, reflecting the relative strength of the bank’s funding and liquidity profile, which reduces the vulnerability of default on its short-term local-currency obligations within Nigeria.

The report outlined that Union Bank’s 16.1 per cent total capital adequacy ratio at end of first half 2021 is modestly above its 15 per cent minimum regulatory requirement and is supported by qualifying subordinated debt of N30 billion, equivalent to 17 per cent of eligible capital, which matures in 2029.

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Union Bank continues to remain resilient in the face of a persistently challenging economic environment, delivering a 1.4 per cent increase in profit before tax toN¦ 11.5 billion in  first half 2021 compared with N11.3 billion in  first half 2020.

The bank management stated that its steady performance reflected  the bank’s successful efforts in growing transaction volumes by leveraging its strong brand, nationwide presence and customer-focused segmentation approach to deliver higher revenues across board.