The rating agency, Fitch Ratings on Friday said that not all news relating to capital at Nigerian banks is negative. The banks remain profitable with results boosted by wide margin and currency revaluation gains. The agency mentioned that although the gains are one off and large in some cases but they have been realized and it provides a strong boost to capital which is positive especially in the light of weak asset quality.
The Fitch Ratings comments is coming after the CBN on Wednesday published its Financial Stability Report, showing that medium and large banks collectively could withstand a 100 percent increase in non-performing loans ( NPLs) but small banks (with assets less than N500 billion) would struggle to withstand even modest NPL deterioration.
Fitch Ratings said it noted the disparity after regulatory stress tests by Central Bank of Nigeria (CBN) highlighted differences in capital strength across the banking sector.
“In our own assessment of the banks we rate, which are mostly large (assets more than N1 trillion), capacity to absorb losses through capital varies considerably,” the ratings agency said. “Zenith Bank is stronger than the rest, while capital weaknesses at First Bank and Diamond Bank have a significant influence on their ratings.”
Fitch Ratings currently places all Nigerian bank ratings in its highly speculative ‘B’ ratings range, although capitalization is an important differentiator. “The scores we assign, based on capitalization and leverage metrics across the sector, are low, but vary considerably,” the ratings agency said.
On capitalization and leverage for the 11 top banks rated Zenith bank is the only bank with bb-. Banks like Access bank, GT bank, Stanbic IBTC and UBA are rated b+ the other 6 banks namely Fidelity bank, FCMB, Union bank, Wema bank, Diamond Bank and First bank are rated b-.
On influence on viability ratings, the agency rated all the eleven banks moderate except Diamond and First bank that were rated high while Outlook remain stable for all the banks except Diamond bank and First bank with negative outlook also.
On long term International Depository Receipt (IDR) Zenith bank, GT bank and Stanbic IBTC are the only 3 bank with b+other 8 banks have b- ratings while the IDR outlook for Zenith bank, GT bank, Stanbic IBTC, Diamond bank and First bank are negative others are stable