GCR Affirms UBA’s MTNP 1 (Series 1 and Series 2) and MTNP 2 (Series 1) Notes Ratings of A(NG).

31 Oct 2016 In Rating Notifications

GCR Affirms UBA’s MTNP 1 (Series 1 and Series 2) and MTNP 2 (Series 1) Notes Ratings of A(NG).

Lagos, 31 October 2016—Global Credit Ratings has affirmed the national scale long term credit ratings of A(NG) accorded to the following Series’ of Notes issued under United Bank for Africa Plc’s (“UBA”) N400bn Medium Term Note Programme (“MTNP 1”) - Series 1 and Series 2 Notes, and N345bn Medium Term Note Programme (“MTNP 2”) - Series 1 Notes; with the outlooks accorded as Stable. The ratings are valid until August 2017.

·        MTNP 1 (Series 1)    N20.0bn 7-year Subordinated Notes, issued September 2010
·        MTNP 1 (Series 2)    N35.0bn 7-year Subordinated Notes, issued September 2011
·        MTNP 2 (Series 1)    N30.5bn 7-year Subordinated Notes, issued December 2014

RATING RATIONALE

Global Credit Ratings has accorded the above final credit ratings based on the following key criteria:

The ratings reflect UBA’s strong franchise as one of the leading financial services groups in Sub-Saharan Africa by geographical coverage and balance sheet size. The bank offers a wide array of banking, pension, custody and related financial services.

Poor liquidity in Nigeria’s foreign currency market and increased regulation of trading activity negatively impacted UBA’s non-interest income level in F15. However, higher net interest income compensated for this impact, resulting in stronger total operating income of N210.2bn, a growth of 9.2% over F14. With further development in its cost containment measures, the bank’s operational efficiency improved (as evidenced by the cost/income ratio which reduced to 65% from 67.5% in F14). Credit losses were well managed, reflecting the bank’s solid risk management processes. Overall, UBA’s net profit after tax (“NPAT”) grew by 24.5% to N59.7bn in F15 (F14: N47.9bn). UBA also reported a pre-tax profit of N40.3bn for the first half of F16, exceeding the full year forecast and F15’s actual by an annualised 16.7% and 17.5% respectively.

According to the quarterly performance reports provided by the Trustees to the Noteholders on MTNP 1 (Series 1 and Series 2) and MTNP 2 (Series 1), the Issuer has been meeting its obligations under the Issuances on a timely basis (up to 30 June 2016).

Cognisance was taken of the nature of the Series’ Notes as unsecured and subordinated obligations of the Issuer, ranking after all senior indebtedness and the claims of depositors of the bank. As such, the accorded ratings are 2 notches lower than UBA’s national scale long-term rating of AA-(NG), with a Stable outlook.

With no enhancement, timely payment of the obligations under this Issuance is dependent on the performance of the Issuer. Hence, the accorded ratings would be sensitive to a positive rating action on the Issuer. Non-compliance with the set covenants, pressure on the Issuer’s performance, and a downgrade in the Issuer’s rating could trigger a negative rating action.

NATIONAL SCALE RATINGS HISTORY
MTNP 1 (Series 1)                                            MTNP 1 (Series 2)                                  MTNP 2 (Series 1)
Initial rating (August 2010)                                Initial rating (September 2011)                 Initial rating (February 2015)
Long term: A+(NG)                                              Long term: A(NG)                                       Long term: A(NG)
Outlook: Stable                                                 Outlook: Stable                                         Outlook: Evolving

Last rating (August 2015)                                Last rating (August 2015)                        Last rating (August 2015)
Long term: A(NG)                                              Long term: A(NG)                                      Long term: A(NG)
Outlook: Stable                                               Outlook: Stable                                       Outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst                                Committee Chairperson
Julius Adekeye                                   Dave King
+23 41 462 2545                                 .(JavaScript must be enabled to view this email address)
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APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Criteria for Rating Banks and Other Financial Institutions, updated March 2016
Previous Issuer rating reports (2010-16)
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; 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 United Bank for Africa Plc, and therefore, GCR has been compensated for the provision of the ratings.

United Bank for Africa Plc participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of info received was considered adequate and has been independently verified where possible.

The credit ratings above were disclosed to United Bank for Africa with no contestation of/changes to the ratings.

The information received from United Bank for Africa Plc , United Capital Trustees Limited, and Investment One Financial Services Limited to accord the credit ratings included the Issuer’s 31 December 2015 audited financial statements, audited six month results (up to 30 June 2016), quarterly Trustees’ performance reports up to 30 June 2016, the Master Trust Deed for MTNP 1, the Master Trust Deed for MTNP 2, the Programme Shelf Prospectus for MTNP 1, the Programme Shelf Prospectus for MTNP 2, the Trust Deed for MTNP 1 (Series 1), the Trust Deed for MTNP 1 (Series 2), the Trust Deed for MTNP 2 (Series 1), the Supplemental Shelf Prospectus for MTNP 1 (Series 1), the Supplemental Shelf Prospectus for MTNP 1 (Series 2), as well as the Supplemental Shelf Prospectus for MTNP 2 ( Series 1).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

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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