GCR Revises First Bank of Nigeria Outlook to Rating Watch Evolving
GCR Ratings has affirmed First Bank of Nigeria Limited’s national scale long and short-term issuer ratings of A+ (NG) and A1 (NG) respectively, with a Rating Watch Evolving outlook, according to a new rating note.
According to the rating note, First Bank of Nigeria Limited’s ratings continue to reflect the strengths and weaknesses of the consolidated First Holdings Plc group because the bank is the core operating entity within the group.
Consequently, while the ratings have been assigned to the bank, the analytical considerations relate primarily to the group, GCR stated.
“The ratings take into cognisance the increase in the group’s paid-up capital, and weaker asset quality; while the Rating Watch Evolving Outlook is based on the bank’s ongoing capital raising exercise which is primarily aimed at meeting the minimum capital requirements by 31 March 2026 per Central Bank of Nigeria”.
GCR highlighted that the bank capitalisation has improved as of 30 June 2025, driven by capital injection of NGN147.0 billion being the net proceeds of the NGN150.0 billion rights issue. Also, First Bank improved profitability on the back of higher interest rates and fees strengthen its capital.
The ratings analysts however, said the bank’s GCR core capital ratio remains low at about 14% due to a significant increase in risk-weighted assets over the period.
To sustain its current license, the bank needs to increase paid-up capital by about NGN123 billion by 31 March 2026, GCR stated, adding that the management plans to raise NGN350 billion by end of 2025 to provide for a stronger capital buffer.
GCR ratings analysts noted that there are two main risks to the outlook for capitalisation: the expiration of regulatory forbearance for stage 2 loans which may require higher provisioning out of profits, and the need to shore up loan loss reserves which currently cover only about 55% stage 3 loans.
“There was a material shift in group’s risk position following the reclassification of a major obligor from stage 1 to stage 3 in fiscal 2024.
“This led to an increase in non-performing loans (NPLs) ratio to 10.2% as at 31 December 2024 (from 4.9% as at December 2023). The position as 31 March 2025 showed mild recovery (at 9.7%), however, upside risks remain strong”.
Ratings analysts said in the update that macroeconomic risk factors such as inflation and foreign exchange volatility are softening but will remain potent over the outlook period.
In addition, they noted that First Bank of Nigeria remains vulnerable to the highly volatile oil and gas sector which currently accounts for about half of total loans due to local currency repricing.
The ratings note amplified that the group’s strong domestic position continues to support the overall business profile and the bank’s ratings.
First Holdings, the fourth largest financial institution in Nigeria by assets and earnings and is therefore critical to the Nigerian economy, GCR stated.
Ratings analysts explained that the group also attracts well experienced professionals to its board and management team to drive governance and implementation of its five-year strategy cycles.
“Having operated for over a century, the group has built a strong domestic franchise across the Nigerian financial services sector; while also growing its international franchise through its relatively modest operations in six other countries across Africa and the United Kingdom, as well as in France and China.
“Consequently, the group is a major facilitator for cross border trades involving Nigeria through its strong relationship with global international financial institutions.
“We note that while the board and management team is adequately constituted with apparent strong board oversight over management decisions, the last three years have seen changes in key persons/shareholders which we deem potentially negative to the ratings in view of the likely impact on strategic direction and implementation for the group if they continue to occur.”, GCR said.
It pinpointed that ratings of First Bank of Nigeria are supported by strong local and foreign currency liquidity as well as stable funding.
Ratings analysts stated that the bank’s customer deposits which are behaviourally sticky account for over 75% of total funding, with an overall stable funds’ ratio of more than 90% over the last five years.
However, cost of funds remains elevated due to sustained monetary policy. Ratings analysts said nevertheless, the group continues to attract cheap deposits while maintaining good access to a diverse pool of international financial institutions.
First Bank’s Rating Watch Evolving outlook is premised on potential new capital injection over the next six months which may support the ratings at the current level, GCR said in the rating note.
Rating analyst noted that there is some degree of uncertainty over the full impact of the expiration of regulatory forbearance on stage 2 loans for the bank’s capitalisation and asset quality metrics.
The funding and liquidity positions as well as business profile are expected to remain stable barring further changes in significant shareholding, GCR added. #GCR Revises First Bank of Nigeria Outlook to Rating Watch Evolving Investors Get 26.50% Interest Rate on CBN OMO Bills
