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Moody’s downgrades Zenith Bank, GTB, Sterling Bank, others

Monday, 13 November 2017


MOODY’S Investors Service has downgraded to B2 from B1 the long-term local currency deposit and issuer ratings of four Nigerian banks. It also downgraded the long-term local and foreign currency issuer ratings of another development bank.

The agency, in its new rating released Friday, listed the banks to include Access Bank Plc (Access), Guaranty Trust Bank Plc (GTBank), United Bank for Africa Plc (UBA) and Zenith Bank Plc (Zenith) while the Bank of Industry, BOI, was listed as the development bank.

Moody’s also downgraded to B3 from B2, the long-term foreign currency deposit ratings of Access, GTBank, UBA, Zenith, Union Bank of Nigeria Plc (Union), First Bank of Nigeria Limited (FBN) and Sterling Bank Plc (Sterling).

Finance and investment experts believe that one of the key reasons why companies face credit ratings downgrade is because of their deteriorating finances, usually high debt levels. It indicates that the company may not be able to service its debt as per schedule or, in some cases, may even default

In its latest rating of banks, the agency noted that the rating reflects the government’s reduced capacity to provide support to Nigerian banks in times of stress and the banks’ significant holdings of government securities linking their credit profiles to that of the government.

“The decision to downgrade banks’ long-term foreign currency deposit ratings follows the downgrade of the relevant country ceiling for foreign currency deposits to B3 from B2,” the agency said.

Commenting on the rationale behind the rating, Moody’s said the primary driver of the rating action is the weaker capacity of the government to provide support to banks, in case of stress, as reflected in the downgrade of the sovereign issuer rating to B2 from B1.

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