Fitch Revises Outlook on UBA Subsidiaries to Negative on Parent Action

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Fitch Ratings has revised the Outlook on United Bank for Africa Cameroon S.A. (UBA Cameroon), United Bank for Africa (Ghana) Limited (UBA Ghana) and United Bank for Africa Senegal SA (UBA Senegal) to Negative from Stable.

The Outlook revision follows a similar action taken on their parent, United Bank for Africa plc (UBA plc: B+/Negative), on 24 December 2019 (see: Fitch Revises Outlook on 4 Nigerian Banks to Negative on Sovereign Action) reflecting the revision of the Outlook on the Nigerian sovereign (B+) to Negative.

All three banks’ Long-Term Issuer Default Ratings (IDRs) have been affirmed at ‘B’.
Key Rating Drivers
IDRs and Support Ratings
The IDRs of UBA Cameroon, UBA Ghana and UBA Senegal are driven by a limited probability of support from UBA plc, as expressed by their ‘4’ Support Ratings (SR).
Fitch’s view of support considers a high propensity of UBA plc to provide support given the banks’ majority ownership, common branding, reputational risks to UBA plc and the high level of management and operational integration between all three banks and the wider group.
Their Long-Term IDRs of ‘B’, one notch below that of UBA plc, primarily reflect Fitch’s view of the strategic importance of the banks, which operate outside the group’s home market of Nigeria, to UBA plc’s regional network and ambitions as a pan-African banking group.
Fitch considers the level of potential support at the three banks to be manageable for UBA plc, given its comfortable levels of capital and liquidity and the subsidiaries’ small size; each represented about 4% of consolidated group assets at end-1H19. However, we see a moderate risk of regulatory restrictions in Nigeria that could constrain UBA plc’s access to foreign currency and thereby hinder the parent’s ability to provide timely and sufficient support in case of need.
The revision of the Outlook on the banks’ Long-Term IDRs to Negative from Stable mirrors the rating action on UBA plc. It reflects Fitch’s view that in the event of a UBA plc downgrade the one notch differential between these banks and their parent would likely be maintained.
Viability Rating
The Viability Ratings of UBA Cameroon, UBA Ghana and UBA Senegal are unaffected by this rating action.
Rating Sensitivities
IDRs and Support Ratings
The SRs and Long-Term IDRs of UBA Cameroon, UBA Ghana and UBA Senegal are sensitive to a UBA plc downgrade and to a reduced propensity of UBA plc to provide support (not Fitch’s base case).
UBA Ghana’s Long-Term IDR is also sensitive to a downward revision of Ghana’s Country Ceiling of ‘B’, which would most likely be triggered by a downgrade of the sovereign rating. This is not our base case, however, given the Stable Outlook on Ghana’s Long-Term IDR.
Public Ratings With Credit Linkage To Other Ratings
The Long-Term IDRs of all three banks are driven by institutional support from UBA plc and are therefore linked to the parent’s Long-Term IDR.

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