GCR Keeps FBNQuest Merchant Bank Outlook on Rating Watch Negative
GCR Ratings has affirmed FBNQuest Merchant Bank Limited’s national scale long and short-term issuer ratings of BBB (NG) and A3 (NG), respectively, with the outlook maintained on Rating Watch Negative.
The ratings of FBNQuest Merchant Bank Limited’s balance a sound risk profile, stable funding and strong liquidity against a modest competitive position and constrained capitalisation, GCR said in the rating note released on Tuesday.
Ratings analysts stressed that the Negative Rating Watch reflects potential non-applicability of group support uplift upon the completion of FBN Holdings Plc’s disposal of the bank, which is a wholly owned subsidiary.
GCR said this is because FBNQuest MB’s ownership is not expected to transfer to an entity with a similarly strong credit risk profile.
The rating note stated that FBNQuest Merchant Bank is a major player within the Nigerian merchant banking sub-sector, with service offerings that span investment and corporate banking, trade finance and treasury services.
The bank maintains its position within the sub-sector, as reflected by a market share of 30.2%, 42.7% and 31.2% of the sub-sector’s loans, deposits and total assets respectively as of 31 December 2024.
However, its share of the wider sector’s total assets remains below 1%, which constrains our competitive position assessment.
Historically, FBNQuest Merchant Bank’s brand franchise has been supported by its membership in FBN Holdings, a diversified financial services group which houses the fourth largest commercial bank in Nigeria and creates various cross-selling opportunities and operational efficiencies that drive growth.
“Looking ahead, our competitive position assessment will largely depend on the FBNQuest MB’s ability to defend its market position post completion of the planned disposals by FBN Holdings”.
GCR wrote that the bank’s capitalisation assessment remains a major ratings negative.
As of 30 June 2025, the bank’s shareholders’ funds declined to NGN37.3 billion from NGN43.0billion as of 31 December 2024, following the sizeable dividend payout to FBN Holdings.
Consequently, the bank’s GCR core capital ratio declined to 11.4% as of 30 June 2025 from 15.5% in 2024 and is expected to be sustained at a similar range in the short term.
Ratings analysts said the expected capital contributions from the new shareholders could support the capitalisation assessment in the next 12 months
FBNQuest Merchant Bank’s risk profile is a positive ratings factor, reflective of its stringent underwriting criteria and prudent monitoring of exposures.
However, counterparty concentration risk remains high, with the single and twenty largest obligors accounting for 11.5% and 99.2% of gross loans respectively as of 30 June 2025.
Additionally, the bank has a stressed exposure within the steel production segment of the manufacturing sector. Nonetheless, the NPL ratio remains below the regulatory limit of 5.0%, registering at 3.6% as of 30 June 2025 from 4.3% in 2024.
“While we expect the risk profile to remain good over the next 12-18 months, significant strain on asset quality metrics could negatively impact our assessment.
“We have assessed funding and liquidity at an intermediate level. FBNQuest MB is largely funded by customer deposits, which accounted 71.0% of the funding base as of 30 June 2025.”
However, the bank’s deposit book is concentrated in line with trends in the merchant banking sub-sector, with the top 20 depositors accounting for 71.9% of total deposits as of 30 June 2025 from 72.0% in 2024.
The merchant bank liquidity is strong, according to GCR, reflected by the liquid asset coverage of customer deposits and wholesale funding which registered at 83.9% and 37.3x respectively as of 30 June 2025.
Ratings analysts expect the bank’s funding structure and liquidity profile to remain sound over the next 12-18 months”.
“The Rating Watch Negative Outlook reflects our expectations that the planned change in shareholding could result in a negative ratings movement should there be limited headroom for group support uplift under the bank’s new shareholding structure”, GCR stated. Stanbic IBTC Falls by 9.2% on Weak Investors Sentiment
