FITCH Global Ratings, a foremost international rating Agency, has assigned Union Bank of Nigeria plc National Long and Short-term Ratings of 'A+(nga)' and 'F1(nga)' respectively, as well as Issuer Default Rating ("IDR") 'B+' with a stable outlook.
The Agency explained that the "F1" rating indicates Union Bank's "strongest capacity for timely payment of financial commitments".
The report stated that IDR, short-term, national and support ratings reflect the probability of support for Union Bank in case of need from the Nigerian authorities. It said Union Bank's well-established domestic franchise would mean a high level of willingness to support but the propensity was limited by the 'BB-IDR' assigned to Nigeria.
Fitch noted that the bank would report robust earnings growth during the 2007 financial year, owing to the continued improvement in economic activities and buoyant credit demand. It said that improved depositor confidence caused the Bank's total deposits to rise by 21 per cent year-on-year to N411.5 billion during the 2006 financial year, while it considers market risk to be low and liquidity levels adequate.
The Agency also acknowledged that Union Bank's initiatives to improve its Information and Communication Technology (ICT) as well as risk and control structures would help to alleviate operational risk pressures.
It further noted that Union Bank is a Nigerian-listed universal bank, established 90 years ago with an extensive branch network through which it extends universal banking services and is one of the four largest banks in Nigeria in terms of assets, with a strong banking franchise.
Union Bank has overtime developed into the largest financial supermarket in the country, with viable subsidiaries, specializing in mortgages, insurance, trusteeship, stockbroking, property development/management and share registration. Each of these subsidiaries is a leader in its relevant sub-sector and contributing substantially to the group's gross earnings.
Fitch Assigns Zenith Bank Highest Rating in Nigeria
Vanguard
26 Nov. 2007
Fitch Ratings Agency has rated Zenith Bank to AA-, the highest of any Nigerian bank, based on what it described as 'positive outlook' for the bank in its ratings released last week.
The global rating agency's recognition of the bank's consistent performance is coming barely two weeks after Zenith was awarded the highest rating of any Nigerian bank by Standard and Poors.Fitch said Zenith Bank ratings were boosted by the maintenance of strong levels of capitalisation, continuation of competitive performance measures relative to peers and sound asset quality indicators.
The rating agency, which is committed to providing the world's credit markets with independent, timely and prospective credit opinions upgraded Zenith's National Long-term and Short-term ratings to 'AA- (AA minus)(nga)' from 'A+(nga)' and 'F1+(nga)' from 'F1(nga)', respectively.
"The Positive Outlook for the Long-term IDR reflects Zenith's strong and growing domestic franchise, consistently good financial performance and low levels of non-performing loans," Fitch said
"The ratings reflect adequate levels of capitalisation and the potential that capital levels will be further enhanced. The ratings also reflect Nigeria 's difficult operating environment," the rating agency added.
Only a fortnight ago, the bank was accorded BB- rating, the highest given to any Nigerian bank by Standard & Poors.
The foremost rating agency highlighted the bank's leading market position in corporate banking; conservative risk profile and good asset quality; solid capitalization and robust funding and liquidity. This is the same as Nigeria's foreign currency rating of BB-/Stable B.
"The agency further said that it "considers that the economic and industry risks of Nigeria act as the major constraints on the ratings of Zenith Bank." This implies that Zenith Bank could have been rated higher but for the Nigeria 's sovereign rating. The agency observes that Zenith's "stable outlook balances the bank's ability to benefit in terms of size and profitability, from strong macroeconomic growth,"
Boosted by its ever improving control of the financial services market, Zenith Bank was also recently awarded Aaa rating by another foremost agency, Agusto and Company for the ninth consecutive year.
Agusto said in the bank's latest rating reflected its dominant position in the industry, strong asset quality, strong liquidity profile, good capitalization and good earning among others. "We consider Zenith Bank to have a strong capacity to meet its obligations when due, we thus uphold the bank's Aaa rating," Agusto said in its report.
Zenith bank remains the biggest bank in Nigeria on total assets plus contingents of N1.2 trillion as at the end of June 30, 2007 and the most capitalized quoted company with a total market capitalization of over N500 billion.
The bank has enjoyed a successful year, with its consistently good financial performance producing high patronage on the floor of the Nigerian Stock Exchange (NSE). It was recently named the "Quoted Company of the Year" by the Council of the Nigeria Stock Exchange (NSE).
Zenith Bank is returning to the capital market to raise about N130 billion in a combined rights issue of 1,763, 000, 000 ordinary shares of 50 kobo each and public offer 1,654,557,911 units. The offer is expected to open on Thursday, December 6, 2007. Zenith's stock has enjoyed price appreciation of over 532.7 percent since 2004 when it went public.
The operating results of the bank in the last five years indicate an impressive performance on all parameters. Total assets plus contingents grew by 730.06 per cent from N153.44 billion as at the end of June 2003 to N1.271 trillion in June 2007. Within the same period, gross earnings increased from N17.8 billion to N94.9 billion, representing a 433.14 percent growth while profit before tax also grew by 372.42 percent from N5.44 billion to N25.7 billion. Profit after tax for same period rose by 327.27 percent from N4.42 billion to N18.8 billion.
