Following a comprehensive rating process, Fitch Ratings has affirmed Union Bank’s Long-Term Issuer Default Rating at ‘B- with a stable outlook. The lender’s Long Term National rating was also upgraded from ‘BBB- (nga)’ to ‘BBB (nga), with its Short-Term National Rating upgraded to ‘F2 (nga)’ from ‘F3 (nga)’.
According to the rating agency, the upgrade to Union Bank’s national ratings reflects the lender’s increased creditworthiness relative to other issuers in Nigeria and the relative strength of its funding and liquidity profile.
The rating report issued by Fitch stated: “Union’s Long-Term IDR is driven by its intrinsic creditworthiness, as defined by its ‘b-‘ Viability Rating (VR)…The VR also reflects Union’s concentration and sensitivity to Nigerian operating environment risks and moderate franchise.
This is balanced by a stable funding and liquidity profile and adequate profitability for the bank’s risk profile. The Stable Outlook reflects Fitch’s view that risks to Union’s credit profile are captured at the current rating level, with sufficient headroom, under our base case, to absorb the fallout from operating environment pressures.”
The agency also explained “Union (Bank)’s National Ratings reflect its creditworthiness relative to other issuers in Nigeria and are driven by its standalone strength. The upgrade of Union’s Long-Term National Rating reflects its increased creditworthiness relative to other Nigerian issuers. Its Short-Term National Rating is the higher of the two possible options for a ‘BBB (nga)’ Long-Term National Rating under Fitch’s criteria, reflecting the relative strength of the bank’s funding and liquidity profile, which reduces the vulnerability of default on its short-term local-currency obligations within Nigeria.
“Union’s 16.1% total capital adequacy ratio at end-1H21 is modestly above its 15% minimum regulatory requirement and is supported by qualifying subordinated debt of NGN30 billion (equivalent to 17% of eligible capital), which matures in 2029.”
Union Bank continues to remain resilient in the face of a persistently challenging economic environment, delivering a 1.4% increase in Profit Before Tax (PBT), to ₦11.5 billion in H1 2021 compared to ₦11.3 billion in H1 2020.This steady performance reflects the Bank’s successful efforts in growing transaction volumes by leveraging its strong brand, nationwide presence and customer-focused segmentation approach to deliver higher revenues across board.