Fitch affirms Sterling Bank’s ‘B-‘ rating

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Fitch Ratings affirmed Sterling Bank Plc’s Long-Term Issuer Default Rating (IDR) at ‘B-‘ with a Stable Outlook, Viability Rating (VR) at ‘b-‘ and National Long term to “BBB+(nga)”.

The rating agency also noted that it had removed Sterling’s support rating and support rating floor as they are no longer relevant to the agency’s coverage following the publication of its updated bank rating criteria. day on November 12, 2021.

In accordance with our updated criteria, we have assigned Sterling a Government Support Rating (GSR) of “ns”.

In the rating note released over the weekend, Fitch said, Sterling’s IDRs are determined by its standalone creditworthiness, as expressed by its RV of “b-“.

“The RV reflects Sterling’s sensitivity to Nigeria’s challenging operating environment, a fairly small franchise, high credit concentrations and weaknesses in the bank’s foreign exchange (FC) funding profile. These are offset by sound asset quality indicators and reasonable capitalization.

“Rising global risks will weaken domestic operating conditions. Inflation is expected to remain stubbornly high, posing downside risks to our real GDP growth forecast of 3.1% in 2022 and 3.3 % in 2023. However, downside risks are somewhat mitigated by strong oil prices, which should also support growth in non-oil countries and the quality of banks’ assets.

“Sterling operates exclusively in Nigeria under a domestic banking license and holds fairly low market shares, accounting for 2.6% of banking system assets at the end of 2021.”

The rating agency, however, noted high credit concentrations in the bank, saying that “single borrower concentration is high, with the 20 largest customer exposures accounting for 50% of gross lending and 262% of the capital base of Fitch (FCC) at the end of 2021. Exposure to oil and gas has decreased in recent years but remains high, representing 24% of gross loans and 124% of the FCC at the end of 2021.

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