Lagos, 13 November 2018–Global Credit Ratings has affirmed the national scale long term credit ratings of A(NG) accorded to Series 1 Notes issued under United Bank for Africa Plc’s (“UBA” or “the bank”) N345bn Medium Term Note Programme; with the outlook accorded as Stable. The rating is valid until September 2019.
Global Credit Ratings (“GCR”) has accorded the above final credit ratings based on the following key criteria:
The accorded rating is supported by UBA’s established franchise, significant domestic market share (being one of the top-tier banks in Nigeria) and status as a systemically important bank. Further rating support is derived from the bank’s risk appropriate capitalisation, comfortable liquidity, as well as geographic and earnings diversification with operations in twenty African countries and offices in three global financial centres (London, Paris and New York).
While the bank registered a 20.6% growth in total operating income to N326.6bn in FY17, performance at the pre-tax level was constrained by increase in impairment charge and operating expenses (which rose by 18.8% and 23.7% respectively). Thus, the bank recorded a pre-tax profit of N105.3bn for the year, translating to a 16.1% year-on-year growth. A pre-tax profit of N79.1bn was recorded for the nine-month period ended 30 September 2018, indicating that performance was in line with budget on annualised basis. Liquidity risk has been mitigated through maintaining of a sizeable portion of liquid assets. The bank’s liquidity profile is further supported by USD500m Eurobond facility raised during the year as well as available credit lines from other financial institutions.
According to the quarterly performance reports provided by the Trustees to the Noteholders on the Series 1 Notes, the Issuer has been meeting its obligations under the Issuances on a timely basis, up to the most recent coupon payment date (30 June 2018).
Cognisance was taken of the nature of the Series’ Notes as unsecured and subordinated obligations of the Issuer, ranking after all senior indebtedness and the claims of depositors of the bank. As such, the accorded rating is two notches lower than UBA’s national scale long-term rating of AA-(NG), with a Stable outlook.
Timely payment of the obligations under this Issuance is dependent on the performance of the Issuer. Hence, the accorded rating would be sensitive to a positive rating action on the Issuer. Non-compliance with the set covenants, as well as a negative rating action on the Issuer could trigger a negative rating action on the Notes.
NATIONAL SCALE RATINGS HISTORY
Initial rating (February 2015)
Long term: A(NG)
Last rating (November 2017)
Long term: A(NG)
Primary Analyst Committee Chairperson
Julius Adekeye Dave King
+234 1904 9462-3 firstname.lastname@example.org
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Criteria for Rating Banks and Other Financial Institutions, updated March 2017
Issuer rating reports (2010-18)
Glossary of Terms/Ratios (February 2016)
RATING LIMITATIONS AND DISCLAIMERS
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SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the rating is for 12 months, or as indicated by the applicable credit rating document.
The rating was solicited by, or on behalf of United Bank for Africa Plc, and therefore, GCR has been compensated for the provision of the ratings.
United Bank for Africa Plc participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of info received was considered adequate and has been independently verified where possible.
The credit rating above was disclosed to United Bank for Africa Plc with no contestation of/changes to the rating.
The information received from United Bank for Africa Plc , United Capital Trustees Limited to accord the credit rating included the Issuer’s 31 December 2017 audited financial statements, management accounts for the nine month period to 30 September 2018, half yearly Trustees’ performance reports up to 30 September 2018, the Master Trust Deed for Medium Term Note Programme, the Programme Shelf Prospectus for Medium Term Note Programme, the Trust Deed for the Medium Term Note Programme, the Supplemental Shelf Prospectus for the Series 1 Notes, as well as up-to-date performance report from the Trustee.