Moody’s assigns first-time ratings to Union Bank of Nigeria Plc

London (Capital Markets in Africa) – Moody’s Investors Service has today assigned first-time ratings to Union Bank of Nigeria plc (Union Bank): long- and short-term Local and Foreign Currency Deposit and Issuer Ratings of B2/Not Prime, and a b3 Baseline Credit Assessment (BCA). Moody’s also assigned long- and short-term Counterparty Risk (CR) Assessment of B1(cr)/Not Prime(cr), long- and short-term National Scale Local Currency Ratings of Aa3.ng/NG-1, and long- and short-term National Scale Foreign Currency Ratings of A1.ng/NG-1. The overall outlook on the bank’s ratings is stable. A full list of assigned ratings can be found at the end of this press release.

The standalone BCA of the bank reflects (1) Moody’s expectation of robust levels of tangible common equity over the next 12 to 18 months, following recent approval by the bank’s board and shareholders to raise capital via a rights issue; and (2) a stable deposit-based funding structure and moderate local currency liquidity buffers. These strengths are balanced against (3) Nigeria’s challenging operating environment, which takes into account both institutional and structural weaknesses and the strong growth potential of the system; (4) elevated credit risks on the back of single-name and sector concentration risks; and (5) relatively modest profitability levels versus larger local peers.

The deposit ratings incorporate one notch of uplift from the bank’s b3 baseline credit assessment (BCA), based on our assessment of a ‘moderate’ likelihood of government support in the event of need. Our assessment of support reflects the bank’s importance within the Nigerian banking system, with an estimated 4% market share of total assets (N1.3tn, $3.5bn) as of December 2016, and the government’s willingness to support banks, as indicated in past crises.

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