Sterling Bank, Others Restrategise After Moody’s Ratings

Fidelity, FCMB, GT Bank Remain Stable

By Bayo Bernard

Nigeria’s financial sector is still grappling with recent bombshell by global rating firm, Moody Investors Service which declared some Nigeria banks negative for investors.

But financial analysts informed the magazine that the firm had intended to put the banks on their toes in the new year, so that they can begin to work on the negatives and avoid the pitfalls of the past that drowned many Nigerian banks.

‘When you look at the report very well you will realize that it focused on salient governance issues which will determine the survival of any lender,” Patrick Omole, a financial expert told the magazine.

Moody, had in its latest report warned those planning to invest in Nigerian banks to be very cautious in the year 2020.

It listed some few banks in the country to be risky for investors while endorsing others as good investment portfolios.

The investors’ advisory had months ago affirmed Nigerian banks stable in the face of tight economy policy of the Buhari administration and global economic spat between two largest world economies, the United States and China.

But Moody has now declared the outlook of many top tier banks in the country vulnerable and unstable, warning investors to be careful where they invest their money in the year 2020.

According to the firm, Sterling Bank will come under serious pressure in coming months as its revenue generation size will be sliced.

But authorities in the bank told the magazine that more is being done by the management to refocus the lender as one of the profitable and reliable banks in the country.

“The gains of the last two years will be consolidated. More focus will be on expanding the client size and increase our capital base,”  the source said.

Factors that have affected the tier two bank ratings include low level capital levels, high foreign currency loans, its relatively small size and tiny clientele, Moody said in the report.

Moody stated in the report that tier two banks such as FCMB, Union Bank, Fidelity and others in this category will face some challenges, however, assuring that their survival ratings is very high.

For Fidelity and others, the global rating body said more pressure are likely to be experienced due to weak efficiency, moderate profitability, foreign currency funding positions and other factors, but affirmed that these banks will still weather the storm.

On Fidelity Bank, Moody said the bank’s b3 BCA shows relatively tight funding conditions, due to high, but improving, loan to customer deposit ratio and high proportion of foreign currency loan.

It’s however good news for Guarantee Trust Bank Plc. whose ratings has been declared very robust.

GT Bank’s rating b2 BCA, Moody said, is very high due to the bank’s robust earnings generation capacity, high capital buffers, high liquidity buffers and robust predominantly deposit funded balance sheets.

The bank also boasts of strong franchise due to high earning margins and low credit and operational costs.

For UBA, Moody stated that the bank possess strong outlook due to its pan-Africanism warned that over confidence could affect its ratings if not checked.

Moody said UBA and Zenith Bank have remained strong despite seeming challenges, adding that the two banks are way out of risk for prospective investors and customers, but warned UBA to recline from risky business funding.

“These strengths are counterbalanced by UBA’s rising, although still moderate, dependence on confidence-sensitive funding,” Moody said.

According to Moody, First Bank faces more risks due to its large chunk of Non-performing Loans, NPL, but the challenge is mitigated due to its large stocks of liquid assets.