Worldwide ranking company, Fitch Rankings has affirmed United Financial institution for Africa Plc’s (UBA) Lengthy-Time period Issuer Default Score (IDR) at ‘B-‘ with a Optimistic Outlook.
Fitch has additionally affirmed the financial institution’s Nationwide Lengthy-Time period Score at ‘A+(nga)’ with a Secure Outlook. A full checklist of ranking actions is beneath.
Based on the ranking company, UBA’s IDRs are pushed by its standalone creditworthiness, as expressed by its VR. The VR is constrained by Nigeria’s Lengthy-Time period IDR of ‘B-‘ because of the financial institution’s excessive sovereign publicity relative to capital and the focus of its operations in Nigeria. The ‘b-‘ VR is one notch beneath the ‘b’ implied VR because of the working atmosphere/sovereign ranking constraint.
It famous that UBA’s Nationwide Lengthy-Time period Score balances a powerful franchise towards leverage above that of higher-rated friends. “UBA represented 11 per cent of home banking sector property at end-2023 and has a big pan-African community, with subsidiaries in 20 nations outdoors of Nigeria contributing 33 per cent of internet revenue in 2023 and 47 per cent of property at end-2023. UBA’s capacity to capitalise on enterprise and commerce flows and appeal to deposits throughout the continent is a aggressive benefit relative to home friends and results in stronger income diversification.
“Single-obligor credit score focus is average, with the 20-largest loans representing 108 per cent of UBA’s Fitch Core Capital (FCC) at end-2023. Oil and gasoline publicity (end-2023: 19.5 per cent of internet loans) is decrease than friends. Nigerian sovereign publicity by way of securities and the Central Financial institution of Nigeria’s money reserves is excessive relative to FCC (end-2023: over 250 per cent), albeit decrease than that at different giant banks.
“UBA’s impaired loans (Stage 3 loans underneath IFRS 9) ratio elevated to six.2 per cent at end-2023 (end-2022: 3.4 per cent). Particular mortgage loss allowance protection of impaired loans is low (end-2023: 23 per cent) because of important money collateral. Stage 2 loans (end-2023: 14 per cent of gross loans; concentrated inside the oil and gasoline and energy sectors and largely US dollar-denominated) stay excessive and characterize a danger to asset high quality. Fitch forecasts the impaired loans ratio to extend reasonably within the close to time period.
“UBA delivers sound profitability, as indicated by working returns on common whole property averaging 2.8 per cent over the previous 4 years. Working revenue elevated to five.1 per cent of common whole property in 2023, primarily pushed by FX revaluation good points that accompanied the devaluation of the naira, and profitability will profit from larger rates of interest in 2024.
“UBA has the next FCC ratio (end-2023: 35.9 per cent) than its friends, which is partly defined by a decrease risk-weight density (end-2023: 26 per cent). UBA’s tangible leverage ratio (end-1Q24: 10.1 per cent) is excessive relative to most Nigerian banks. Pre-impairment working revenue is robust, offering a big buffer to soak up mortgage impairment fees with out pressuring capital. Fitch expects capital ratios to extend reasonably within the near-term as UBA raises core capital in an effort to adjust to new paid-in capital necessities by end-1Q26.
It famous that UBA’s “funding is principally by way of a steady and cheap buyer deposit base comprising a excessive share of present and financial savings accounts (end-2023: 85 per cent). Single-depositor focus is average, with the most important 20 deposits representing 16 per cent of buyer deposits at end-2023. Liquidity protection in native and foreign currency (FC) is comfy.