Following a comprehensive rating process, Fitch Ratings has affirmed Union Bank’s Long-Term Issuer Default Rating at ‘B- with a stable outlook.
The lender’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 lender’s increased creditworthiness relative to other issuers in Nigeria and the relative strength of its funding and liquidity profile.
Fitch Affirms Union Bank ‘B-’, Outlook Stable
The rating report issued by Fitch stated that, “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,” it said.
The agency also explained “Union (Bank)’s National Ratings reflect its creditworthiness relative to other issuers in Nigeria and are driven by its standalone strength.
“Union Bank’s 16.1 per cent total capital adequacy ratio at end of first half (H1), 2021 is modestly above its 15 per cent minimum regulatory requirement and is supported by qualifying subordinated debt of N30 billion (equivalent to 17% of eligible capital), which matures in 2029.”
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 to N11.5 billion in H1 2021 compared to N11.3 billion in H1 2020.