Moody’s assigns B1 rating to UBA senior unsecured notes

 

 

Moody’s Investors Service (Moody’s) has today assigned a B1 rating to the USD500 million senior unsecured five-year notes recently issued by United Bank for Africa Plc (UBA). The assigned rating are in line with the bank’s B1 long-term local currency deposit ratings and carry a stable outlook. The issuance will constitute direct, unsecured and unsubordinated obligations of UBA.

RATINGS RATIONALE
The B1 long-term rating assigned to UBA’s recent senior unsecured debt issuance is aligned with its B1 local currency deposit ratings, reflecting that the debt securities will be unsecured and unsubordinated obligations of UBA and will rank at least equally with all other unsecured and unsubordinated present and future obligations of the bank at all times.
UBA’s ratings incorporate one notch of uplift on the bank’s b2 baseline credit assessment (BCA), based on our assessment of a high likelihood of government support in the event of need. UBA’s BCA of b2 reflects its resilient asset quality profile, with non-performing loans at 3.9 percent of gross loans, significantly lower than the 14 percent banking system average; its good capital buffers; and its predominantly deposit funded balance sheet which is supported by a solid pan-African franchise. These strengths are balanced against Nigeria’s challenging operating environment which will negatively affect the bank’s asset quality and revenue growth, and place some pressure on its foreign currency liquidity position.

WHAT COULD CHANGE THE RATING UP/DOWN
Given the alignment described above, the senior unsecured debt ratings will reflect any rating actions taken on UBA’s deposit ratings.
Upwards pressure on the bank’s ratings is currently limited given that UBA’s local currency deposit ratings are already at the same level as the Nigerian government’s issuer rating of B1, stable. UBA’s ratings could be upgraded if operating conditions improve and Nigeria’s sovereign rating is upgraded, while the bank maintains its strong financial metrics.
UBA’s ratings could be downgraded if its asset quality deteriorates meaningfully, putting pressure on the bank’s profitability and capital buffers. A substantial deterioration of the bank’s foreign currency liquidity buffers would also likely trigger a downgrade, as would a downgrade of the sovereign itself.

PRINCIPAL METHODOLOGY
The principal methodology used in this rating was Banks published in January 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating.