Amid board dissolution, Fitch affirms FBN Holdings ratings at ‘B-‘

first bank fitch rating

Fitch has affirmed the Long-Term Issuer Default Ratings (IDRs) of First Bank Nigeria Holdings Plc (FBNH) and its operating subsidiary (FBN) at ‘B-‘ and removed them from Rating Watch Negative (RWN), amid the recent board dissolution of the bank by the CBN.

The recent rating by Fitch reflects a diminishing near-term risk of the bank’s credit fundamentals caused by the economic fallout arising from the oil price crash and coronavirus pandemic.

Recall that the Central Bank had recently dissolved a new Board of Directors announced by FBN Holdings Plc, citing insider related abuses and lack of proper communication to it as reasons for the drastic action.

READ: How Insider Loans, Poor Corporate Governance, and Others Nearly Ruined First Bank – CBN

Commenting on the recent ratings,  Fitch in a notice seen by naijabusiness.com.ng said: ‘’ In our opinion the impact of the economic downturn on FBNH’s and FBN’s credit profiles is largely contained at their current rating level and it will take several quarters before the full extent of the crisis on corporates and households is seen in its financial metrics. Since the previous rating action in March, regulatory forbearance on asset classification and banks’ own debt-relief measures have significantly eased sector asset quality pressures. Debt relief measures are, nevertheless, temporary and with the eventual easing of fiscal and monetary support from the Central Bank of Nigeria (CBN), there remains a material risk that bank asset quality could deteriorate faster, unless economic recovery gathers pace.

‘’The Negative Outlooks on FBNH’s and FBN’s Long-Term IDRs reflect our view of sustained downside risks to the operating environment, the heightened level of risk in doing banking business, resulting in risks to its capital, and ongoing pressures on the bank’s asset quality and earnings over the next 12-18 months.’

According to Fitch, some of the key drivers for the gloomy outlook or ratings include; relative weakness of the firm’s loan book, declining profitability metrics as evident by its weak annualized operating profit/average total assets ratio and its relatively weak capitalization etc.

Fitch is one of the top three credit rating agencies in the world. It offers sovereign credit ratings that describe each nation or qualified financial institution’s ability to meet its debt obligations. Sovereign credit ratings are available to investors to help give them insight into the level of risk associated with investing in a particular country or firm.