9 February 2018

Nigeria: Fitch Affirms Sterling Bank's Ratings, Stable Outlook

Fitch Ratings has affirmed Sterling Bank's Long-Term Issuer Default Rating (IDR) of 'B-' and National Long-Term Rating of 'BBB-(nga)' with a stable outlook for reasons that include its coherent strategy and ability to attract more stable deposits in challenging operating conditions.

Cutting through the industry's jaded product offerings through innovation, the leading Tier Two lender's IDRs are driven by its standalone creditworthiness, coherent strategy, business transformation initiatives, and strong management team, in an updated rating released yesterday by the global credit rating agency.

According to Fitch, Sterling Bank's Non-Performing Loan (NPL) ratio, based on prudential requirements, was 6.1% at end of nine months in 2017, while impaired loans ratio and NPL ratio are below sector averages.

Remarkably, Fitch noted that the lender has successfully attracted more stable retail deposits. "Positively, we also noted that the bank has successfully attracted more stable retail deposits, including strong growth in 'non-interest bearing' deposits (albeit from a low base)".

It added that Sterling Bank's capital adequacy ratio based on Basel II of 11.4% at end of nine months in 2017 was above the regulatory minimum of 10%. "In addition to higher retained earnings and by repositioning its balance sheet, the bank is expected to raise subordinated debt in the domestic market (which counts towards Tier 2 regulatory capital) to improve capital buffers".

"In the medium term, we expect Sterling's prospects to improve as the franchise strengthens with the expansion of its retail/SME and 'non-interest-bearing' lines and business reorganisation."

Commenting on the rating, the Executive Director, Finance & Strategy, Sterling Bank, Suleiman Abubakar said: "The rating affirms the potency of our growth strategy and transformation into one of the most respected financial services franchises in Nigeria offering world-class retail and non-interest banking solutions alongside the traditional corporate, commercial and institutional banking products and service."

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