Fitch Affirms Nigeria’s Zenith Bank Plc at ‘B-‘; Outlook Stable


Fitch Ratings – London – 06 Jun 2023: Fitch Ratings has affirmed Zenith Bank Plc’s Long-Term Issuer Default Rating (IDR) at ‘B-‘ with a Stable Outlook. Fitch has also affirmed the bank’s National Long-Term Rating at ‘AA-(nga)’ and assigned a Stable Outlook. A full list of rating actions is below.

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Zenith Bank’s IDRs are driven by its standalone creditworthiness, as expressed by its ‘b-‘ Viability Rating (VR). The VR is constrained by Nigeria’s Long-Term IDRs of ‘B-‘ due to the bank’s high sovereign exposure relative to capital and the concentration of its operations in Nigeria. The ‘b-‘ VR is one notch below the ‘b’ implied VR due to the operating environment/sovereign rating constraint.

Zenith Bank’s National Long-Term Rating is one of the highest among Nigerian banks, reflecting its strong franchise and financial profile.

Challenging Operating Environment: Banks continue to contend with US dollar shortages and the Central Bank of Nigeria’s (CBN) highly burdensome cash reserve requirement. Fitch expects reform progress under the new administration, including elimination of fuel subsidies and gradual liberalization of the naira.

However, there is a risk of a sharp depreciation due to the large disparity between the official and parallel exchange rates. The CBN has increased its policy rate by 700bp since April 2022 (currently 18.5%) due to rising inflation (22% in 4M23).

Strong Franchise: Zenith Bank is Nigeria’s second-largest banking group, representing 13.5% of domestic banking-system assets at end-2022. The bank has a strong corporate-banking franchise and a retail-focused strategy that leverages on its digital channels. Revenue diversification is strong, with non-interest income representing 50% of operating income in 2022.

High Sovereign Exposure: Single-borrower credit concentration is moderate, with the 20-largest customer loans representing 26% of gross loans and 79% of Fitch Core Capital (FCC) at end-2022. Oil and gas exposure (23% of gross loans at end-2022) is material but lower than other domestic systemically important banks’ (D-SIBs). Strong loan growth (on average 20% annually during 2019-2022) may lead to asset-quality weakening as the loan book seasons. Sovereign exposure through securities and CBN cash reserves is high relative to FCC (over 350% at end-2022).

High Stage 2 Loans: Zenith Bank’s impaired loans (Stage 3 loans under IFRS 9) ratio declined to 1.9% at end-1Q23 from 4.2% at end-2021, reflecting write-offs and the flattering effect of strong loan growth. Specific loan loss allowance coverage of impaired loans was 63% at end-1Q23. Stage 2 loans (22% of gross loans at end-1Q23; concentrated within oil and gas and largely US dollar-denominated) remain high and represent a key risk to asset quality. Fitch forecasts the impaired loans ratio to increase moderately in the near term.

Strong Profitability: Zenith Bank delivers strong profitability, as indicated by operating returns on risk-weighted assets (RWAs) averaging 5.1% over the past four years. Strong profitability is supported by a wide net interest margin (NIM), strong non-interest income and moderate loan impairment charges (LICs). Profitability declined in 2022 due to a weaker NIM and losses stemming from Ghana’s default.

Strong Capitalization: Zenith Bank’s FCC ratio (21.6% at end-2022) is supported by fairly low balance- sheet leverage. Pre-impairment operating profit is strong, providing a large buffer to absorb LICs without affecting capital. Zenith Bank’s regulatory capital ratios have comfortable buffers above impending Basel III requirements. Zenith Bank’s capitalization would be resilient to a material naira devaluation.

Comfortable Liquidity Coverage: Funding is mainly through a stable and inexpensive customer deposit base, comprising a high percentage of current and savings accounts (92% at end-1Q23), with large volumes sourced from individuals and SMEs. Single-depositor concentration is low, with the largest 20 deposits representing 10% of customer deposits at end-2022. Liquidity coverage in local and foreign currencies is comfortable.


Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

A sovereign downgrade could result in a downgrade of Zenith Bank’s Long-Term IDR and VR if Fitch believes that the direct and indirect effects of a sovereign default would likely erode capitalization and foreign-currency liquidity insofar to undermine the bank’s viability.

Absent a sovereign downgrade, a downgrade could result from the combination of a sharp naira depreciation and a marked increase in the impaired loans ratio, resulting in a breach of minimum capital requirements without near-term prospects for recovery. It could also result from a severe tightening of foreign-currency liquidity.

A downgrade of the bank’s National Ratings would result from a weakening of its creditworthiness relative to other Nigerian issuers.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

An upgrade of the Long-Term IDR and VR would require a sovereign upgrade and for the bank to maintains a strong financial profile.

An upgrade of the bank’s National Ratings would result from a strengthening of its creditworthiness relative to other Nigerian issuers.


Zenith Bank’s senior unsecured notes are rated in line with its IDRs as the likelihood of default on these obligations reflects that of the bank. The Recovery Rating of these notes is ‘RR4’, reflecting average recovery prospects in the event of default.

The government’s ability to provide full and timely support to commercial banks is weak due to its constrained foreign-currency resources and high debt servicing metrics. The Government Support Rating (GSR) is therefore ‘no support’, reflecting our view of no reasonable assumption of support for senior creditors being forthcoming should a bank become non-viable.


Zenith Bank’s senior unsecured debt rating would move in tandem with its Long-Term IDR.

An upgrade of the GSR would require an improvement in the government’s ability to provide support, which would most likely be indicated by an increase in international reserves and an improvement in debt-servicing metrics.


The business profile score of ‘b’ is below the ‘bb’ category implied score due to the following adjustment reason: business model (negative).

The earnings and profitability score of ‘b+’ is below the ‘bb’ category implied score due to the following adjustment reason: earnings stability (negative).

Gbenga Samson
Gbenga Samson
Samson Gbenga Salau [Editorial Board Adviser] Gbenga Samuel Salau is a professional journalist with over 17 years experience in journalism, he is a graduate of Communication and Language Arts, University of Ibadan. On completion of his youth service, he joined The Guardian as a freelance journalist and was later absorbed as a staff. While in the University, he was a campus journalist reporting for the Independence Hall and Faculty of Arts Press Clubs. As a campus journalist, he won the following awards; Independence Hall Press Best News writer; University of Ibadan Union of Campus Journalists’ Best News Reporter/Writer; First Runner-up, Reuben Abati Award for Investigative Journalism; Association of Faculty of Arts Students’ Press Best Reporter; University of Ibadan Union of Campus Journalists’ Best Political Writer; Winner, Reuben Abati Award for Investigative Journalism, and University of Ibadan Union of Campus Journalists’ Best Interviewer. He served the Association of Communication and Language Arts Students, as the Public Relation Officer, the same year he was appointed the News Editor of the Association of Faculty of Arts Students Press. The following session, he was made the General Editor, and a member of the 13-man University of Ibadan Students’ Union Transition Committee. As a reporter in The Guardian, in 2014, he won the Promasidor Quill Award Best Report on Nutrition and DAME Business Reporting category. In the 2015 edition of the Promasidor Quill Award, he won the best Report on Nutrition and Brand Advocate Categories, while in 2016, he won the NMMA Print Journalist of the Year, first runner-up Golden Pen Reporter of the Year and SERAs CSR Awards. Gbenga Salau loves traveling, reading, and listening to songs with good lyrics no matter the genre.

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