Fitch Ratings, on July 9, 2009, affirmed Nigeria-based United Bank for Africa Plc's (UBA) ratings at Long-term foreign currency Issuer Default (IDR) 'B+' with Stable Outlook. A full set of ratings appears at the end of this commentary.
The IDR, National and Support Ratings reflect the expected level of support that the bank would receive from the Central Bank of Nigeria (CBN) if required in light of the bank's strong domestic franchise and perceived systemic importance. The Individual Rating reflects strong credit growth and Nigeria's increasingly difficult operating environment. It also factors in the bank's improving financial performance and risk management processes with acceptable levels of liquidity.
UBA's earnings improved during FY08 on the back of enhanced net interest and non-interest income. At FYE08, UBA's tier 1 capital adequacy ratio improved to 20.9% at FYE08 (FYE07: 20.3%). However, Fitch notes that this calculation excluded the expected final dividend payment of NGN12.9bn for FY08 and the unamortized portion of the warehoused assets of Continental Trust Bank of NGN14.1bn. If these were deducted from tier 1 capital, the ratio would have weakened to an estimated 18.1%. UBA's unprovided-for portion of margin lending amounted to NGN23.5bn at H109. A 50% impairment of this against FYE08 capital would result in an estimated tier 1 ratio of 17%. Fitch views capital as moderate in light of expected impairment charges, especially pertaining to margin lending, and UBA's aggressive Africa expansion strategy which may result in increased operational risk. Fitch is of the opinion that UBA would need to raise fresh capital if it were to pursue any material acquisition.
UBA is one of Nigeria's largest banks. Established in 1961, UBA is a universal bank offering retail, commercial, corporate and merchant bank services in Nigeria. UBA had branches in every state of Nigeria at FYE08 and operations in Burkina Faso, Cameroon, Ghana, Ivory Coast, Liberia, Sierra Leone, Uganda, London and New York.
