Economic Issues

Moody’s Warns Investors Against Fidelity Bank, GTBank, Others Over ‘Weak Operating Environment’

Moody’s Warns Investors Against Fidelity Bank, GTBank, Others Over ‘Weak Operating Environment’

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Feb 3, 2023 11:55 AM

Moody's Warns Investors Against Fidelity Bank, GTBank, Others Over 'Weak Operating Environment’
Moody’s Warns Investors Against Fidelity Bank, GTBank, Others Over ‘Weak Operating Environment’

Moody’s Investors Service has downgraded Guaranty Trust Bank (GTBank), Access Bank Plc, First Bank of Nigeria (FBN) and six other commercial banks.

Moody’s, which assesses investment risk in countries and companies, said it has downgraded the investment or credit rating of the aforementioned banks to Caa1 from B3.

Caa1 is a status that identifies companies with ‘very high credit risk’, indicating investors might face substantial risk in retrieving their funds if they buy into securities offered by firms. ‘B3’ is a status without ‘very’, as the firms are only penned down as ‘high credit risk’.

Under the Caa1, Moody’s listed GTBank, Fidelity Bank Plc, Access Bank, First Bank, Sterling Bank Plc, Zenith Bank Plc, Union Bank of Nigeria Plc, United Bank for Africa (UBA) Plc and First City Monument Bank Limited (FCMB).

This means the banks might have a poor standing in meeting their credit obligation to investors who invested in senior unsecured debt. The Caa1 rating was also ascribed to the commercial banks’ long-term deposit ratings, and issuer ratings, according to the document dated 31, January 2023.

“Moody’s Investors Service (“Moody’s”) has today downgraded to Caa1 from B3 the long-term deposit ratings, issuer ratings as well as the senior unsecured debt ratings (where applicable), of all the Moody’s rated banks in Nigeria: Access Bank Plc, Zenith Bank Plc, First Bank of Nigeria Limited, United Bank for Africa Plc, Guaranty Trust Bank Limited, Union Bank of Nigeria plc, Fidelity Bank plc, FCMB (First City Monument Bank) Limited and Sterling Bank Plc.

“At the same time, Moody’s has changed the outlook to stable on the long-term deposit ratings, issuer ratings as well as senior unsecured debt ratings (where applicable) of the nine rated Nigerian banks,” Moody’s wrote.

It added: “Moody’s downgrade of the long-term ratings of nine Nigerian banks reflects a combination of (a) the weakening operating environment, as captured by Moody’s lowering of its Macro Profile for Nigeria to “Very Weak” from “Very Weak+”; and (b) the interlinkages between the sovereign’s weakened creditworthiness (as indicated by the downgrade of the sovereign rating to Caa1 from B3) and the banks’ balance sheets, given the banks’ significant holdings of sovereign debt securities.”

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