Nigeria’s bank ratings placed on CreditWatch negative

 Standard & Poor’s placed the ‘BB-‘ long-term issuer credit rating on Access Bank, First Bank of Nigeria, Guaranty Trust Bank, Stanbic IBTC Bank and Zenith Bank on CreditWatch with negative implications, following similar action on Nigeria’s sovereign ratings. It expected the Nigerian banking sector to face difficulties in 2015. Also, it said that low global oil prices, the pressure on the Nigerian naira, the upcoming presidential elections and the regulatory changes are raising credit risks, are slowing growth opportunities and are weighing on profitability. But it noted that these risks are mitigated, for most banks, by their improved asset quality in 2014 compared with 2010, by better regulatory oversight and by improvements in risk management at local banks over the past few years. As such, it did not expect an asset quality crisis similar to the 2009 crisis.

In addition, S&P indicated that its general outlook for the Nigerian banks remains negative, reflecting the combined pressures on banks’ capital, earnings and asset quality in 2015. Likewise, it considered that banks with larger capital cushions and a history of low credit losses are more stable. Similarly, it noted that top tier banks are better placed to absorb economic disruption and to maintain their financial profiles.

S&P, also reported that these banks benefit from access to low-cost funding, from their well-established corporate franchises, as well as from their stronger underwriting skills. Also, it added that these factors allow top-tier banks to operate without an increase in credit losses and with stronger margins.