GCR Affirms First City Monument Bank Limited’s National Scale Rating of A-(NG); Outlook Negative.

03 May 2017 In Rating Notifications

GCR Affirms First City Monument Bank Limited’s National Scale Rating of A-(NG); Outlook Negative.

Lagos, 02 May 2017—Global Credit Ratings has affirmed First City Monument Bank Limited’s (“FCMB” or “the bank”), public national scale ratings of A-(NG) and A2(NG), in the long and short term respectively; with the outlook accorded as Negative.  The rating is valid until August 2017.


RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit ratings based on the following key criteria:

The accorded ratings reflect FCMB’s financial and competitive position as a Tier 2 bank in Nigeria based on its key financial performance metrics.

The revision of the bank’s rating outlook from ‘Rating Watch’ to ‘Negative’ reflects GCR’s concerns over the bank’s quality of earnings in FY16. While the bank achieved a 32.6% increase in total operating income (“TOI”), this was heavily supported by non-recurring foreign exchange gains arising from naira devaluation, accounting for 23.5% of the reported TOI. Furthermore, the impairment charge escalated by 150.4% to N35.3bn, although the outpacing growth in TOI (together with a reduction in operating expenses) supported earnings growth at the pre-tax level of 114.5% to N13.8bn.

The bank registered a growth of 9.9% in total shareholders’ funds (post adjustment for intangible assets and goodwill) to N156.6bn in FY16, attesting to the bank’s improved internal capital generation capacity. The overall capitalisation position was further supported by subordinated term debt, with total capital and reserves standing at N184.9bn at FY16, representing a 9.8% growth over FY15 and translating to a total risk weighted capital adequacy ratio of 16.5% (FY15:16.9%), surpassing the statutory minimum by some margin.

FCMB’s gross non-performing loan (“NPL”) ratio improved to 3.7% in FY16 (FY15: 4.2%), largely enabled by the loan book clean-up exercise undertaken by the bank, with impaired credits totalling N32.5bn written off the bank’s loan book during the year.

FCMB’s liquidity metrics came under pressure in FY16, with zero buffer maintained above the 30% statutory liquidity requirement at some points during the year.

An improvement in the quality of assets and earnings, higher profitability, and enhanced capitalisation and market position would be favourably considered. Negative action may follow declines in profitability, asset quality, liquidity pressure, and deterioration in operating conditions.


NATIONAL SCALE RATINGS HISTORY                                            

Initial rating (February 2000)                                         
Long term: A+(NG)                                                         
Short term A1(NG)
Outlook: Stable                                        

Last rating (September 2016)                                       
Long term: A-(NG)                                                                                             
Short term A2(NG)
Outlook: Rating watch                                                        
                                                           
ANALYTICAL CONTACTS

Primary Analyst                                       
Julius Adekeye                                          
+23 41 462 2545                                        
.(JavaScript must be enabled to view this email address) 
         
Committee Chairperson   
Dave King
.(JavaScript must be enabled to view this email address)


APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Criteria for Rating Bank and Other Financial Institutions, updated March 2016
Nigerian Financial Institutions Overview (2017)
FCMB rating reports (2000- 2017)
Glossary of Terms/ Ratios (February 2016)

RATING LIMITATIONS AND DISCLAIMERS

ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK:  HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT HTTP://GLOBALRATINGS.COM.NG.

SALIENT FEATURES OF ACCORDED RATINGS

GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the rating is for 12 months, or as indicated by the applicable credit rating document.

The ratings were solicited by, or on behalf of, First City Monument Bank Limited, and therefore, GCR has been compensated for the provision of the ratings.

First City Monument Bank Limited participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The credit rating/s has been disclosed to First City Monument Bank Limited with no contestation of the rating.

The information received from First City Monument Bank Limited and other reliable third parties to accord the credit rating included the 31 December 2016 audited annual financial statements (plus four years of comparative numbers). In addition, information specific to the rated entity and/or industry was also received.

 

 

 

 

 

 

 

 

 

 

 

 

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ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE UNDERSTANDING RATINGS SECTION OF THIS SITE.

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