April 29, 2014 / 4:22 PM / 3 years ago

Fitch Rates Nigeria's FCMB 'B'; Outlook Stable

(The following statement was released by the rating agency) LONDON, April 29 (Fitch) Fitch Ratings has assigned Nigerian First City Monument Bank Limited (FCMB) a Long-term Issuer Default Rating (IDR) of 'B' with a Stable Outlook, and a Short-term IDR of 'B'. A full list of rating actions is available at the end of this rating action commentary. KEY RATING DRIVERS - IDRs, SUPPORT RATING AND SUPPORT RATING FLOOR FCMB's Long- and Short-term IDRs are driven by Fitch's expectation of support for the bank from the Nigerian authorities if required. FCMB has been assigned a Support Rating (SR) of '4' and a Support Rating Floor (SRF) of 'B', reflecting Fitch's expectation of a limited probability of support for the bank from the Nigerian authorities. In Fitch's view, while the propensity to support the Nigerian banking sector is high, the ability of the authorities to provide support is limited given Nigeria's 'BB-' sovereign rating. The bank's IDR of 'B' is at the SRF for the smaller Nigerian banks. FCMB's SR reflects its systemic importance, increasing domestic franchise, and importance to the real economy. RATING SENSITIVITIES - IDRs, SR, AND SRF FCMB's SR and SRF are sensitive to a change in Fitch's assessment of the Nigerian authorities' ability, as reflected by its ratings, or propensity to support the bank. The SRF could be revised over time if the bank becomes more systemically important by building a stronger franchise and market share, particularly in retail banking. An upgrade of the Nigerian sovereign rating would not necessarily lead to an upgrade of the bank's SR or upward revision of the SRF. KEY RATING DRIVERS - VR FCMB has been assigned a Viability Rating (VR) of 'b-', driven by the bank's highly speculative standalone creditworthiness. The VR primarily reflects the extremely challenging operating environment in Nigeria as well as FCMB's small but evolving franchise, which includes an ambitious strategy of growing its lending in what Fitch views as an inherently high-risk Nigerian retail market. The VR also reflects, to a moderate extent, the bank's financial profile, such as its adequate earnings and profitability as well as an improving funding profile. While asset quality remains satisfactory, impaired loans as a proportion of gross loans are trending up (NGN3.9% at end-2013) and reserve coverage is declining (66% at end-2013). The bank's Fitch core capital ratio of around 20% at end-2013 was sound, but rapid asset growth is putting pressure on capitalisation. RATING SENSITIVITIES - VR An upgrade of the VR is unlikely in the near-term, given its operating challenges. In the medium- to long-term a VR upgrade would be contingent on the bank maintaining sound financial metrics, combined with building a track record in executing its strategic objectives. KEY RATING DRIVERS: NATIONAL RATINGS FCMB's National Long-term Rating of 'BBB+(nga)' and National Short-term Rating of 'F2(nga)' are driven by its Long-term IDR and Fitch's opinion of the bank's creditworthiness relative to the strongest credits in Nigeria. RATING SENSITIVITIES: NATIONAL RATINGS FCMB's National Ratings are sensitive to changes in its Long-term IDR and relative creditworthiness. The rating actions are as follows: FCMB Long-term foreign currency IDR: assigned at 'B'; Stable Outlook Short-term foreign currency IDR: assigned at 'B' National Long-term rating: assigned at 'BBB+(nga)' National Short-term rating: assigned at 'F2(nga)' Viability Rating: assigned at 'b-' Support Rating: assigned at '4' Support Rating Floor: assigned at 'B' Contact: Primary Analyst Mahin Dissanayake Director +44 20 3530 1618 Fitch Ratings Limited 30 North Colonnade London, E14 5GN Secondary Analyst Bjorn Norrman Director +44 20 3530 1330 Committee Chairperson Jens Hallen Senior Director +44 203530 1326 Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, Global Financial Institutions Rating Criteria, dated 31 January 2014, are available at www.fitchratings.com Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Additional Disclosure Solicitation Status null/gws/en/disclosure/solicitation?pr_id=828108 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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