CBN silent on latest Fitch rating on Tier-1 banks’ over operating environment
Barely four days after the global financial rating agency, Fitch Ratings expressed fresh concerns over government and regulatory ability to support the Nigerian banking industry, the Central Bank of Nigeria (CBN), has remained mute.
Fitch had earlier in the week, stated in its latest credit ratings for three Nigerian Tier-1 banks, including Access Bank, Guaranty Trust Bank (GTBank) and United Bank for Africa (UBA), that the credit rating of each bank is constrained by the current operating environment in the land.
Fitch in its report averred that “The fragile economic recovery restrains banks’ growth prospects and asset quality. Operating conditions are still difficult for banks. “Despite stronger oil prices in second half of 2018 (H2’18) supporting economic growth, credit demand is weak and banks face pressure on margins and capital.
“Fitch believes that sovereign support to Nigerian banks cannot be relied on given Nigeria’s weak ability to provide support, particularly in foreign currency. In addition, there are no clear messages of support from the authorities regarding their willingness to support the banking system.
“Therefore, the Support Rating Floor of all Nigerian banks is ‘No Floor’ and all Support Ratings are ‘5’. This reflects our view that senior creditors cannot rely on receiving full and timely extraordinary support from the Nigerian sovereign if any of the banks become non-viable,” Fitch noted.
Industry analysts’ who spoke to Business Hilights on the development frowned at the apparent dormant regulatory climate in the sector, citing examples with the recent way and manner Skye Bank was rescued, rebranded and given fresh lifeline of N786bn when the same board appointed by the same CBN had blown away the initial N100bn injected in the same bank when it was first rescued in 2016.
Observers also frowned again, at the way and manner about 158 microfinance banks, 22 finance houses and a number of mortgage banks went down the drain at a time the country is harping on financial inclusion.
Besides, both the National Assembly and finance experts have kicked against the new recapitalization amount for MFBs, saying it is too much and will discourage growth in Small and Medium Enterprises (SMEs) who rely on the services of MFBs to run their businesses.
