GCR affirms Stanbic IBTC Bank Limited’s AAA Ratings
GCR Ratings (GCR) has affirmed Stanbic IBTC Bank Limited’s national scale long and short-term issuer ratings of AAA (NG) and A1+ (NG) respectively, with a stable outlook
Stanbic IBTC Bank Limited ratings affirmation balances a sound competitive position, good risk profile, stable funding structure and liquidity position against a decline in capitalisation metrics due to the impact of Naira devaluation on the loan book, GCR said in the rating note.
The bank is considered the core operating entity within Stanbic IBTC Holdings PLC, as such, the national scale issuer ratings reflect the strengths and weaknesses of the group.
According to GCR, The rating is also supported by Stanbic IBTC Bank’s affiliation with Standard Bank Group, the largest shareholder, accounting for 68% equity stake of Stanbic IBTC Holdings PLC in 2023.
Standard Bank Group is one of the largest banking groups in Africa with total assets of USD166.4 billion as at 31 December 2023, delivering finance solutions across twenty African countries.
The rating note stated that the group’s competitive position is a positive rating factor, underpinned by well-diversified business operations.
As of 31 December 2023, Stanbic IBTC Holdings PLC comprised eleven subsidiaries, operating across major segments of the Nigerian financial services landscape, including banking, investment banking, asset management, pension management, custodian services and insurance, the rating note said.
GCR said the group’s strong presence in the non-bank financial services supports its diversification, provides cross-selling opportunities, and strengthens earnings capacity for the bank in a highly competitive market.
With a balance sheet size of N5 trillion, or USD5.5 billion, at 31 December 2023, Stanbic IBTC Bank accounted for approximately 4.0% of the Nigerian banking industry’s total assets.
Analysts said the group’s revenue base remains largely stable supported by the dominance of stable earnings sources for its core banking operations.
The group’s capitalisation metrics were pressured from the impact of the steep Naira devaluation on the bank’s risk-weighted assets in 2023 and first quarter of 2024 given that a sizeable portion of the bank’s loan book is foreign currency denominated, settling at 62.2% in 2023 from 49.0% in 2022.
Consequently, the group’s GCR core capital ratio declined to 16.6% as of 31 December 2023 and further to 14.6% as of Q1 2024 from 21.4% in 2022 registering within the low band of our assessment.
The group has announced plan to raise N150 billion or USD112.8 million equity capital through a right issue that is expected to be concluded before the end of 2024.
“If successful, this could improve the GCR core capital ratio to range between 18%-20% over the next 12-18 months, however this remains below five-year (2018 to 2022) historical average of 23.0%”.
GCR said any further devaluation in the Naira value would have a negative impact on capitalisation metrics and could place downward pressure on the ratings. Nonetheless, the group’s regulatory capital adequacy ratio has consistently been maintained above regulatory minimum of 10% for its license category.
The stable outlook reflects GCR expectations that the planned capital raise of N150 billion will materialise within the stipulated time.
This would support the group’s GCR core capital ratio at 18%–20% over the next 12 month, according to the rating note.
GCR said the outlook reflects expectations that Stanbic IBTC Bank’s financial profile would remain conservative, with asset quality metrics well contained and below the industry’s averages.
However, loan book concentration by obligor and currency is expected to persist, predicated on the prolonged exchange rate volatility.
The group’s funding structure is expected to remain sound, although CBN’s aggressive contractionary monetary policies could impact the banking sector’s liquidity over the next 12-18 months. #GCR affirms Stanbic IBTC Bank Limited’s AAA (NG) Ratings GTCO’s Market Value Falls 31% Below 52-Week High
