Union Bank of Nigeria Plc’s Long-Term Issuer Default Ratings (IDR) have been lowered by Fitch Ratings from “B-” to “CCC,” and its National Long-Term Rating has been downgraded from “BBB(nga)” to “B+(nga).”
A downgrading of the bank’s Viability Rating (VR) from “b-” to “ccc” was also made due to worries about potential capital requirements violations.
Fitch also confirmed UBN’s Government Support Rating (GSR) of “no support” in its rating that was made public on Friday.
The downgrades are a result of concerns surrounding the timescale for regaining compliance as well as the Fitch-estimated protracted breach of the bank’s 10% total capital adequacy ratio (CAR) requirement.
The rating agency observed that Union Bank’s independent creditworthiness, as demonstrated by its “ccc” Viability Rating (VR), is the primary factor influencing its “CCC” IDRs.
It stated,
Among Nigerian Fitch-rated banks, UBN has the lowest National Ratings, largely due to the estimated violation of regulatory capital limits. On January 10, 2024, the CBN appointed a new chief executive officer and dismissed the board and management of three banks, including UBN, claiming a number of breaches, including regulatory non-compliance and corporate governance deficiencies. The board’s reconstitution is moving forward, and the bank is still running as usual.
Fitch estimated that because of a notable increase in its regulatory risk reserve—which is subtracted from capital for the purposes of capital adequacy computations—UBN has violated its 10% CAR (end-3Q23: 16.1%) threshold.
Although UBN intends to raise funds through capital raisings to restore compliance, the timeline is still unknown, especially in light of the company’s impending merger with shareholder Titan Trust Bank (TTB).
TimesNow.com.ng reported that Titan Trust Bank, on Saturday, December 23, 2023, reacted to the special investigative report by the Jim Obazee-led panel into the activities of the Central Bank of Nigeria (CBN) under Godwin Emefiele, stating that there was no fraud in the acquisition of Union Bank.
Obazee submitted the report of his investigation into acquiring Union Bank and Keystone Bank to President Bola Tinubu in two letters dated December 20, 2023.
The investigation report had accused the former CBN boss of using fronts to acquire Union Bank for Titan Trust Bank Limited and Keystone Bank without evidence of payment.
Source: TimesNow.com.ng
