GCR Assigns Globus Bank Adequate Creditworthiness, Certainty Ratings
GCR, an emerging market focused ratings agency, has assigned Globus Bank Limited national scale long and short-term issuer ratings of BBB-(NG) and A3 (NG) respectively; with a stable outlook.
According to detail on the ratings firm website, the assigned ratings scale is interpreted to means that the issuer is creditworthy and has adequate certainty of timely payment of its obligations.
According to GCR, the ratings of Globus Bank Limited are underpinned by its strong capitalisation, low-risk level, highly liquid balance sheet, as well as lender’s limited track record.
The report stated that the stable outlook reflects GCR’s expectations that Globus’ capitalisation metrics would remain strong despite its increasing risk assets.
“Asset quality metrics are anticipated to be maintained at the sound level, with a reduction in concentration by the obligor. We also believe that funding and liquidity will remain stable and adequate”, it added.
In the new report, GCR said that the bank ranks among the tier 3 banks in Nigeria and controls an estimated market share of 0.4% and 0.3% in assets and deposits respectively at the financial year 2020 (FY20).
It added that Globus’ competitive position is constrained by its evolving brand franchise, short track record, and limited local geographical diversification, being a regional licenced bank.
“As a new entrant, Globus’ customer base is concentrated, as such, risk position was high in terms of the twenty largest obligors and depositors at FY20”, GCR noted.
The ratings hinted that capitalisation is considered strong and a ratings strength. Given Globus’ new operations and its moderate risk asset level, capitalisation metrics were at a satisfactory level at FY20, as GCR core capital ratio closed at a high level of 43.6%.
“Looking ahead, we expect the bank’s capitalisation metrics to remain within moderate range over the next 12 to 18 months despite risk asset growth and expanded operation weighing down the capitalisation assessment”, the ratings explained.
GCR said it is also cognisant of the bank’s significant exposures to market risk in view of the substantial (43%) market sensitive income realised in FY20.
“Risk position is sound and well contained, evidenced by the nil non-performing loan at FY20. This position rides on the back of the bank’s short track, with the most part of the loan book yet to reach maturity”.
The ratings report said the bank’s credit losses is also minimal at 1.9% at FY20 and compares favourably with the industry average of about 3%.
Expectedly, it explained that concentration by obligor is considered high, with the twenty largest exposures accounting for about 70% of the loan book at FY20.
“We anticipate a more diversified loan book over the short to medium term as the bank continues to expand its lending activities. In addition, foreign currency (FCY) risk is considered minimal, with FCY loans constituting 5% of the loan portfolio at FY20, well below the industry average 35%”, GCR stated.
Related party exposure constituted less than 10% of the loan book at FY20.
GCR also stated that funding and liquidity position is assessed at an intermediate level. Explaining, the ratings stated that Globus is predominantly funded through customer deposits which account for 65.7% of the funding base at FY20.
It said the deposit book, which grew to N88.6 billion at FY20 from N4.5 billion in the prior year, reflected a good blend of term deposits (41%) and the low-cost saving and current accounts (47%), having the average cost of fund at the end of the year at a moderate 3.9%.
“Liquidity is good, evidenced by the highly liquid nature of the balance sheet at FY20, as GCR liquid assets covered total wholesale funding moderately (23.7x), while the GCR calculated liquid asset to total customer deposits ratio stood at 23%.
“Although the matching of assets and liabilities reflects a liquidity gap of N27.7bn in the ‘less than one month’ band, the behavioural pattern seen in the industry over time indicates that a sizeable portion is usually rolled over at maturity”, the ratings said.
GCR Assigns Globus Bank Adequate Creditworthiness, Certainty Ratings
