Fitch Places Union Bank of Nigeria on Rating Watch Negative Following CBN Intervention

Date:

Fitch Ratings has placed Union Bank of Nigeria PLC’s (UBN) Issuer Default Ratings (IDRs), Viability Rating (VR), and National Ratings on Rating Watch Negative (RWN) as of 15th January 2024. The move follows the Central Bank of Nigeria’s (CBN) announcement on 10th January, dissolving the board and management of three Nigerian banks, including UBN. The regulatory action cited reasons such as non-compliance, corporate governance failure, and engagement in activities threatening financial stability.

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The RWN introduces uncertainty regarding the background of the CBN’s intervention, potential further regulatory actions, and negative implications for UBN’s standalone credit profile. Key concerns include corporate governance risks and liquidity pressures due to potential funding instability. Fitch anticipates resolving the RWN within six months, aiming for clarity on the CBN’s intervention and its impact on UBN’s credit profile.

Key Rating Drivers:
– The CBN’s intervention leads to regulatory uncertainty.
– Potential further regulatory actions and their impact on UBN’s credit profile.
– Corporate governance risks and liquidity pressures from potential funding instability.

Rating Sensitivities:
Negative Rating Action/Downgrade
– Further regulatory intervention with restrictive measures, fines, or adverse findings.
– Funding instability leading to a deposit run or unavailability of additional liquidity.

Positive Rating Action/Upgrade
– Affirmation and removal from RWN if UBN operates normally under new management.
– No additional regulatory interventions or adverse financial profile implications.

ESG Considerations:
– UBN’s ESG Relevance Score for Governance Structure revised to ‘4’ from ‘3’ due to CBN’s board and management dissolution.
– Negative impact on credit profile, relevant to ratings along with other factors.

Rating Actions:
– Union Bank of Nigeria PLC: LT IDRB- Rating Watch On, Prior Rating: B-
– Union Bank of Nigeria PLC: ST IDRB Rating Watch On, Prior Rating: B
– National LTBBB(nga) Rating Watch On, Prior Rating: BBB(nga)
– National STF2(nga) Rating Watch On, Prior Rating: F2(nga)
– Viabilityb- Rating Watch On, Prior Rating: b-

This development underscores the evolving scenario post the CBN’s intervention and its potential repercussions on Union Bank of Nigeria’s credit ratings. Fitch will continue monitoring to provide a comprehensive assessment in the coming months.

Gbenga Samson
Gbenga Samsonhttp://ThisDayLive.com
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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