Fitch Ratings has revised Bank of Industry’s (BOI) Outlook to Stable from Negative, while affirming the bank’s Long-Term Issuer Default Rating (IDR) at ‘B’.
According to the rating agency, “The affirmation of BOI’s ‘B’ Long- and Short-Term IDRs, ‘B’ Support Rating Floor (SRF) and Support Rating of ‘4’ reflects Fitch’s view of potential support the bank could receive from the Nigerian authorities in case of need. The revision of the Outlook on BOI’s Long-Term IDR to Stable mirrors the Outlook on the sovereign.
“Fitch has equalised BOI’s Long-Term IDR and SRF with the Long-Term IDR of the sovereign as it believes that the Nigerian authorities have a high propensity to support BOI. Our assessment primarily reflects (i) the bank’s important and clearly defined policy role in funding economic growth in Nigeria; (ii) its 99.9% state ownership, split between the Ministry of Finance (94.8%) and the Central Bank of Nigeria (CBN; 5.1%); and (iii) the entirety of the bank’s wholesale funding being either provided or guaranteed by the Nigerian state. However, Fitch also views the ability of the authorities to support BOI as limited as indicated by Nigeria’s ‘B’ Long-Term IDR.
“BOI is Nigeria’s primary development bank, with the sole mandate of financing the country’s emerging industrial sector. The bank works closely with federal and state governments, and Nigerian banks, to meet its developmental objectives. BOI plays an important role in supporting important government policies and in providing counter-cyclical loans since the onset of the economic crisis resulting from the coronavirus pandemic.
“BOI has successfully managed to diversify its resources in recent years. In March 2020, the bank secured a EUR1 billion loan facility from a syndicate of commercial banks and multilateral development banks, which is fully guaranteed by the CBN. We expect that it will serve to expand BOI’s lending to priority sectors.
“BOI maintains a solid capital base (end-1H20: equity-to-asset ratio of 24.4%), which is prudent for the bank’s exposure to the volatile operating environment. Profitability is not a key objective; however, BOI continues to generate reasonable returns on equity driven by healthy net interest margins and, so far, moderate loan impairment charges.
“The affirmation of BOI’s Long-Term National Rating of ‘AA+(nga)’ reflects the bank’s unchanged creditworthiness relative to that of other credits in Nigeria”.
