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Moody’s Assigns First-Time Ratings to Nigeria’s Sterling Bank
LAGOS, Nigeria (Capital Markets in Africa) —- Moody’s Investors Service has today assigned first-time ratings to Sterling Bank plc (Sterling): B2/Not Prime Local and Foreign Currency issuer and deposit ratings, which are underpinned by a b3 Baseline Credit Assessment (BCA). The outlook on all ratings is stable. Moody’s also assigned a Counterparty Risk Assessment (CRA) of B1(cr)/Not Prime(cr).
Sterling Bank’s b3 BCA reflects (1) solid asset quality metrics and provision coverage; (2) improvements to the bank’s IT infrastructure and risk management processes; and (3) high liquidity buffers and a solid deposit funding base. These strengths are balanced against (1) Nigeria’s (Ba3, stable outlook) challenging operating environment, which takes into account both the strong growth potential of the system and institutional and structural weaknesses; (2) the high loan growth experienced by the bank in recent years, which could pose potential challenges as the loan book seasons; (3) vulnerabilities in asset quality on account of high single-name and sector concentration risks; and (4) modest capital levels.
The ratings also incorporate a one-notch uplift from Sterling’s b3 baseline credit assessment (BCA), based on our assessment of a moderate likelihood of government support in the event of need.