Lagos, 12 July 2021 – GCR Ratings (“GCR”) has assigned Globus Bank Limited national scale long and short-term issuer ratings of BBB-(NG) and A3(NG) respectively; with a Stable Outlook.
| Rated Entity / Issue | Rating class | Rating scale | Rating | Outlook / Watch |
| Globus Bank Limited | Long Term issuer | National | BBB-(NG) | Stable Outlook |
| Short Term issuer | National | A3(NG) |
Rating Rationale
The ratings of Globus Bank Limited (“Globus”, “the bank”) are underpinned by its strong capitalisation, low risk level, highly liquid balance sheet, as well as its a limited track record.
Globus is a new entrant in the Nigerian commercial banking space, with track record of less than two years. The bank ranks among the tier 3 banks in Nigeria and controls an estimated market share of 0.4% and 0.3% in assets and deposits respectively at FY20. Globus’ competitive position is constrained by its evolving brand franchise, short track record, and limited local geographical diversification, being a regional licenced bank. As a new entrant, Globus’ customer base is concentrated, as such, risk position was high in terms of the twenty largest obligors and depositors at FY20.
Capitalisation is considered strong and a ratings strength. Given Globus’ new operations and its moderate risk asset level, capitalisation metrics was at a satisfactory level at FY20, as GCR core capital ratio closed at a high level of 43.6%. Looking ahead, we expect the bank’s capitalisation metrics to remain within moderate range over the next 12 to 18 months despite risk asset growth and expanded operation weighing down the capitalisation assessment. GCR is also cognisant of the bank’s significant exposures to market risk in view of the substantial (43%) market sensitive income realised in FY20.
Risk position is sound and well contained, evidenced by the nil non-performing loan (“NPL”) at FY20. This position rides on the back of the bank’s short track, with the most part of the loan book yet to reach maturity. Credit losses is also minimal at 1.9% at FY20 and compares favourably with the industry average of about 3%. Expectedly, concentration by obligor is considered high, with the twenty largest exposures accounting for about 70% of the loan book at FY20. We anticipate a more diversified loan book over the short to medium term as the bank continues to expand its lending activities. In addition, foreign currency (“FCY”) risk is considered minimal, with FCY loans constituting 5% of the loan portfolio at FY20, well below the industry average 35%. Related party exposure constituted less than 10% of the loan book at FY20.
The funding and liquidity position is assessed at an intermediate level. Globus is predominantly funded through customer deposits (c.65.7% of the funding base at FY20). The deposit book, which grew to N88.6bn at FY20 from N4.5bn in the prior year, reflected a good blend of term deposits (41%) and the low-cost saving and current accounts (47%), having the average cost of fund end the year at a moderate 3.9%. Liquidity is good, evidenced by the highly liquid nature of the balance sheet at FY20, as GCR liquid assets covered total wholesale funding moderately (23.7x), while the GCR calculated liquid asset to total customer deposits ratio stood at 23%. Although the matching of assets and liabilities reflects a liquidity gap of N27.7bn in the ‘less than one-month’ band, the behavioural pattern seen in the industry overtime indicates that a sizeable portion are usually rolled over at maturity.
Outlook Statement
The Stable Outlook reflects GCR’s expectations that Globus’ capitalisation metrics would remain strong despite its increasing risk assets. Asset quality metrics are anticipated to be maintained at sound level, with a reduction in concentration by obligor. We also believe that funding and liquidity will remain stable and adequate.
Rating Triggers
An upward rating movement could be considered if the capital metrics are sustained at high level, and NPL maintained at nil. We may lower the ratings if asset quality materially deteriorates and/or if the GCR core capital declines below the 30% level over the rating horizon.
Analytical Contacts
| Primary analyst | Adeyinka Olowofela | Senior Analyst, Financial Institutions |
| Lagos, NG | Yinka@GCRratings.com | +234 1 904 9462 |
| Committee chair | Matthew Pirnie | Group Head of Ratings |
| Johannesburg, ZA | MatthewP@GCRratings.com | +27 11 784 1771 |
Related Criteria and Research
| Criteria for the GCR Ratings Framework, May 2019 |
| Criteria for Rating Financial Institutions, May 2019 |
| GCR Ratings Scale, Symbols & Definitions, May 2019 |
| GCR Country Risk Scores, February 2021 |
| GCR Financial Institutions Sector Risk Score, February 2021 |
Ratings History
Globus Bank Limited
| Rating class | Review | Rating scale | Rating class | Outlook | Date |
| Long Term Issuer | Initial/last | National | BBB-(NG) | Stable | July 2021 |
| Short Term Issuer | A3(NG) |
Risk Score Summary
| Rating Components & Factors | Risk scores |
| Operating environment | 7.25 |
| Country risk score | 3.75 |
| Sector risk score | 3.50 |
| Business profile | -3.00 |
| Competitive position | -3.00 |
| Management and governance | 0.00 |
| Financial profile | 2.00 |
| Capital and leverage | 2.00 |
| Earnings vs. Risk | 0.00 |
| Liquidity | 0.00 |
| Comparative profile | 0.00 |
| Group support | 0.00 |
| Government support | 0.00 |
| Peer analysis | 0.00 |
| Total Score | 6.25 |
Glossary
| Balance Sheet | Also known as Statement of Financial Position. A statement of a company’s assets and liabilities provided for the benefit of shareholders and regulators. It gives a snapshot at a specific point in time of the assets the company holds and how they have been financed. |
| Capital | The sum of money that is invested to generate proceeds. |
| Cash | Funds that can be readily spent or used to meet current obligations. |
| Credit Rating | An opinion regarding the creditworthiness of an entity, a security or financial instrument, or an issuer of securities or financial instruments, using an established and defined ranking system of rating categories. |
| Debt | An obligation to repay a sum of money. More specifically, it is funds passed from a creditor to a debtor in exchange for interest and a commitment to repay the principal in full on a specified date or over a specified period. |
| Diversification | Spreading risk by constructing a portfolio that contains different exposures whose returns are relatively uncorrelated. The term also refers to companies which move into markets or products that bear little relation to ones they already operate in. |
| Exposure | Exposure is the amount of risk the holder of an asset or security is faced with as a consequence of holding the security or asset. For a company, its exposure may relate to a particular product class or customer grouping. Exposure may also arise from an overreliance on one source of funding. In insurance, it refers to an individual or company’s vulnerability to various risks |
| Income | Money received, especially on a regular basis, for work or through investments. |
| Interest | Scheduled payments made to a creditor in return for the use of borrowed money. The size of the payments will be determined by the interest rate, the amount borrowed or principal and the duration of the loan. |
| Issuer | The party indebted or the person making repayments for its borrowings. |
| Leverage | With regard to corporate analysis, leverage (or gearing) refers to the extent to which a company is funded by debt. |
| Liquidity | The speed at which assets can be converted to cash. It can also refer to the ability of a company to service its debt obligations due to the presence of liquid assets such as cash and its equivalents. Market liquidity refers to the ease with which a security can be bought or sold quickly and in large volumes without substantially affecting the market price. |
| Long Term Rating | See GCR Rating Scales, Symbols and Definitions. |
| Margin | A term whose meaning depends on the context. In the widest sense, it means the difference between two values. |
| Market | An assessment of the property value, with the value being compared to similar properties in the area. |
| Maturity | The length of time between the issue of a bond or other security and the date on which it becomes payable in full. |
| Rating Outlook | See GCR Rating Scales, Symbols and Definitions. |
| Risk | The chance of future uncertainty (i.e. deviation from expected earnings or an expected outcome) that will have an impact on objectives. |
| Short Term Rating | See GCR Rating Scales, Symbols and Definitions. |
| Short Term | Current; ordinarily less than one year. |
Salient Points of Accorded Ratings
GCR affirms that a.) no part of the ratings were influenced by any other business activities of the credit rating agency; b.) the ratings were based solely on the merits of the rated entity, security or financial instrument being rated; and c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument.
The credit rating has been disclosed to Globus Bank Limited. The rating above was solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the rating.
Globus Bank Limited participated in the rating process via video conference management meetings, and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The information received from Globus Bank Limited and other reliable third parties to accord the credit ratings included:
- Audited financial results as at 31 December 2020
- Management account as at 31 March 2021
- Other related documents.