FITCH 2015 RISK RATING: KNOW YOUR BANK’S RISK PROFILE

Fitch has affirmed the Long-term Issuer Default Ratings (IDRs) of 10 Nigerian banks.  The IDRs of FBN, UBA, Diamond, Fidelity, Union and FCMB are support-driven. Zenith's, FBNH's, GTB's and Access' IDRs are driven by their standalone strength as measured by their Viability Ratings (VRs).

The IDRs of GTB and FBNH are driven by their VRs and are therefore not sensitive to changes in their SRFs.  Key rating drivers - IDRS, support ratings and support rating floors (all banks apart from SIBTC and SIBTCH that only have national ratings.

However, a one-notch downgrade of the sovereign would not necessarily lead to a downgrade of the SRFs. Zenith's and Access' IDRs would only be downgraded if both their Viability Ratings (VRs) and their Support Rating Floors (SRFs) are simultaneously downgraded (both banks VRs and SRFs are currently at the same level) and revised lower.

In assessing the probability of sovereign support, Fitch considers the authorities' willingness to support the Nigerian banks to be high as demonstrated in the past, but its ability to do so may be constrained by Nigeria's 'BB-' sovereign rating.

Fitch assigns Support Rating Floors (SRFs) based on each bank's systemic importance. The most systemically important banks in Fitch's view are FBN, Zenith and UBA, which are assigned SRFs of B+'.

The other banks have SRFs of 'B'. FBNH is the holding company of FBN. It's SR of '5' and SRF of 'No Floor' reflect Fitch's view that while the Nigerian authorities' propensity to support local banks is high, the same level of support would not apply to holding companies.

Zenith's VR considers its strong franchise, management quality, conservative risk appetite and robust financial metrics. Asset quality is sound and upstream oil & gas exposure represented a limited 6% of loans at end-September 2014.

Zenith has a track record of good client selection and Fitch does not expect major impairments in its corporate book. The bank's capitalisation and leverage compare well with peers and benefit from a strong funding franchise, sound liquidity and proven access to wholesale markets.

Zenith's resilient financial performance stands out, and the bank should manage 2015 better than most peers.

GTB's VR considers the bank's sound financial metrics compared with most domestic peers. This includes the bank's sound profitability, driven by efficiency gains from a low cost business model, healthy asset quality, driven by sound underwriting, and adequate capital.  The VR also considers a proven strategy implemented by a strong management team.

FBNH's and FBN's VRs reflect the group's traditionally strong company profile and adequate capitalisation and profitability. Asset quality metrics are acceptable but the group has the highest oil & gas exposure among peers (40% of gross loans at end-September 2014).

This is a key risk, in particular the upstream book (12%). FBNH's has a strong funding franchise. Its retail franchise allows it to source low-cost deposits, and it successfully accessed capital markets in 2014. Group liquidity is adequate.

UBA's VR is constrained by weak, albeit improving, capitalisation. The VR also considers a strong company profile, including a broader international footprint than peers. This makes the bank less sensitive than peers to current turbulence in Nigeria, although 2015 will still be challenging.

Asset quality is adequate. NPLs are currently low, although Fitch expects these to increase. UBA has strong funding and liquidity. Its large pan-African network allows it to collect low-cost deposits, and the loan-to-deposit ratio is low.

Access' VR reflects the bank's adequate capitalisation, which will improve should a planned rights issue complete successfully. The VR also considers the bank's stronger company profile since the Intercontinental Bank acquisition. This has benefitted Access' financial metrics, including improved earnings and asset quality.

Diamond's VR is constrained by weak capitalisation, which is inadequate in light of the bank's risk profile, despite the completion of a rights issue in November 2014. Asset quality is slightly weaker than most peers.

While the level of impaired loans is currently acceptable, certain large exposures present downside risk. Fitch views risk appetite as high, considering plans to materially expand retail and SME lending activities. While these segments are inherently risky, this is where the bank's expertise lies.

Furthermore, risk controls and underwriting standards in the retail business are advanced. The VR also reflects Diamond's acceptable earnings, funding and liquidity.

Fidelity's VR reflects the bank's weaker company profile than peers. The bank's lack of scale manifests in its niche business model. The VR also considers Fidelity's weaker and less stable earnings than peers, a high cost base, and a greater reliance on non-core banking revenues.

The VR also considers the bank's improved asset quality metrics over the last three years.

Union's VR reflects threats to asset quality ratios from a sizeable portfolio of past due, but not impaired, loans and a material exposure to the oil sector. The VR also considers a higher risk appetite than peers, indicated by loan growth above the sector average, albeit from a lower base than peers.

The VR further considers some exposure to operational risk resulting from a weaker technological platform than peers, which Union is currently addressing.

The VR factors in weak earnings, but also a resilient funding profile supported by adequate liquidity.

FCMB's VR is currently constrained by its small but evolving full service banking franchise. The bank plans to expand lending in what Fitch views as inherently high- risk retail and SME segments.

Asset quality is acceptable, although its NPL ratio is likely to worsen as the loan book seasons. Capitalisation is sound, although Fitch expects a weakening in the medium term, driven by loan growth. Earnings are adequate despite a high cost-to-income ratio.

Funding and liquidity are considered the bank's weaknesses, with the regulatory liquidity ratio being one of the lowest in the sector, and the loan-to-deposit ratio being close to 80%.

FBN Long-term foreign currency IDR: affirmed at 'B+'; Stable Outlook Short-term foreign currency IDR: affirmed at 'B' National Long-term rating: affirmed at 'A+(nga)' National Short-term rating: affirmed at 'F1(nga)' Viability Rating: affirmed at 'b' Support Rating: affirmed at '4' Support Rating Floor: affirmed at 'B+' FBN Finance Company BV's subordinated notes: affirmed at 'B-'; assigned 'RR6' FBNH Long-term foreign currency IDR: affirmed at 'B'; Stable Outlook Short-term foreign currency IDR: affirmed at 'B' National Long-term rating: affirmed at 'A(nga)' National Short-term rating: affirmed at 'F1(nga)' Viability Rating: affirmed at 'b' Support Rating: affirmed at '5' Support Rating Floor: affirmed at 'No Floor'

Zenith Long-term foreign currency IDR: affirmed at 'B+'; Stable Outlook Short-term foreign currency IDR: affirmed at 'B' National Long-term rating: affirmed at 'AA-(nga)' National Short-term rating: affirmed at 'F1+(nga)' Viability Rating: affirmed at 'b+' Support Rating: affirmed at '4' Support Rating Floor: affirmed at 'B+' Global medium term note programme affirmed at 'B+' /'RR4'/'B' Senior unsecured notes: affirmed at 'B+'/'RR4'

UBA Long-term foreign currency IDR: affirmed at 'B+'; Stable Outlook Short-term foreign currency IDR: affirmed at 'B' National Long-term rating: affirmed at 'A+(nga)' National Short-term rating: affirmed at 'F1(nga)' Viability Rating: affirmed at 'b-' Support Rating: affirmed at '4' Support Rating Floor: affirmed at 'B+'

Access Long-term foreign currency IDR: affirmed at 'B'; Stable Outlook Short-term foreign currency IDR: affirmed at 'B' National Long-term rating: affirmed at 'A-(nga)' National Short-term rating: affirmed at 'F2(nga)' Viability Rating: affirmed at 'b' Support Rating: affirmed at '4' Support Rating Floor: affirmed at 'B' Access Finance BV's senior notes, guaranteed by Access Bank: affirmed at 'B'/'RR4' Subordinated notes: affirmed at 'B-'/ 'RR6'

GTB Long-term foreign currency IDR: affirmed at 'B+'; Stable Outlook Short-term foreign currency IDR: affirmed at 'B' National Long-term rating: affirmed at 'AA-(nga)' National Short-term rating: affirmed at 'F1+(nga)' Viability Rating: affirmed at 'b+' Support Rating: affirmed at '4' Support Rating Floor: affirmed at 'B' GTB Finance BV's senior notes, guaranteed by Guaranty Trust Bank: affirmed at 'B+'/'RR4' GTB Finance BV's global medium-term note programme, guaranteed by Guaranty Trust Bank: affirmed at 'B+'/'RR4'/'B'

Diamond Long-term foreign currency IDR: affirmed at 'B'; Stable Outlook Short-term foreign currency IDR: affirmed at 'B' National Long-term rating: affirmed at 'BBB+(nga)' National Short-term rating: affirmed at 'F2(nga)' Viability Rating: affirmed at 'b-' Support Rating: affirmed at '4' Support Rating Floor: affirmed at 'B' Senior unsecured notes: affirmed at 'B'/'RR4'

Union Long-term foreign currency IDR: affirmed at 'B'; Stable Outlook Short-term foreign currency IDR: affirmed at 'B' National Long-term rating: affirmed at 'BBB+(nga)' National Short-term rating: affirmed at 'F2(nga)' Viability Rating: affirmed at 'b-' Support Rating: affirmed at '4' Support Rating Floor: affirmed at 'B'

Fidelity Long-term foreign currency IDR: affirmed at 'B'; Stable Outlook Short-term foreign currency IDR: affirmed at 'B' National Long-term rating: affirmed at 'BBB+(nga)' National Short-term rating: affirmed at 'F2(nga)' Viability Rating: affirmed at 'b-' Support Rating: affirmed at '4' Support Rating Floor: affirmed at 'B' Senior unsecured notes: affirmed at 'B'/'RR4'

FCMB Long-term foreign currency IDR: affirmed at 'B'; Stable Outlook Short-term foreign currency IDR: affirmed at 'B' National Long-term rating: affirmed at 'BBB+(nga)' National Short-term rating: affirmed at 'F2(nga)' Viability Rating: affirmed at 'b-' Support Rating: affirmed at '4' Support Rating Floor: affirmed at 'B'

SIBTC National Long-term rating: affirmed at 'AAA(nga)' National Short-term rating: affirmed at 'F1+(nga)' SIBTCH National Long-term rating: assigned at 'AAA(nga)' National Short-term rating: assigned at 'F1+(nga)' The National Ratings of SIBTC and SIBTCH are sensitive to a change in potential support from their ultimate parent, SBG.

Rating sensitivities - The ratings and Outlooks are sensitive to a prolonged and severe recession that would affect the ability or willingness of the Nigerian authorities to provide support.

All Outlooks are Stable. Fitch has also affirmed the National Ratings of Stanbic IBTC Bank Plc (SIBTC) and Stanbic IBTC Holdings Plc (SIBTCH). The ratings are all in the 'B' range, indicating highly speculative fundamental credit quality, and factor in Fitch's expectation of increasingly challenging economic conditions and market volatility in Nigeria.

The operating environment is affected by persistently low oil prices, continuing pressure on the domestic currency naira, likely further monetary policy and regulatory actions and increased political uncertainty.

At the same time, the ratings are underpinned by continued strong underlying economic growth in Nigeria, particularly in non-oil sectors. Fitch expects non-oil GDP growth of 5.5% in 2015 (2014: 7.5%), driven by continued economic reforms and limited impact from public sector austerity. The highly challenging and volatile operating environment in Nigeria constrain the VRs and the other key rating factors, particularly the banks' financial profiles.

The recent oil price shock and subsequent currency pressure has weakened the Nigerian operating environment and is likely to result in lower GDP growth in 2015. In turn, the banks are likely to report weaker profitability, asset quality and capital ratios. These pressures are to an extent captured in Fitch's ratings, and partly explain the Stable Outlooks.

Nevertheless, should the operating environment deteriorate faster than expected, particularly should it significantly impact the banks' capital and asset quality, VR downgrades cannot be ruled out.

Fitch forecasts sector non-performing loans (NPLs) to rise above the Central Bank of Nigeria's (CBN) informal cap of 5%, but below 10% by end-2015. This reflects high credit concentrations as well as emerging risks, particularly in the oil and gas, and power sectors.

These factors, together with a shift to Basel II and CBN's revised regulatory capital computation rules, are likely to add more pressure on capital than previously expected. Tier 1 capital ratios could fall below 15% for many banks, which is low in the Nigerian context.

Oil & gas exposures, particularly upstream segment lending, will be sensitive to low oil prices, in particular when loans are extended to indigenous companies rather than large international operators. If low oil prices persist in 2015, Fitch expects some banks will have to restructure part of these portfolios by extending tenors to better match new cash flow projections.

Fitch expects liquidity to remain tight in 2015, amplified by higher central bank reserve requirements. New limits on foreign currency borrowing and net open positions are likely to reduce US dollar debt issuance. Despite increasing competition for low-cost and stable deposits, customer deposit growth should remain healthy and help loans-to-deposit ratios remain below the regulatory limit of 80%.

2015 ELECTION: GEJ AND DUNNING-KRUGER EFFECT

“Look at this scenario, imagine President Barak Obama saying “Stealing is not corruption” what do you think will happen. I can say with a degree of safety and little contradiction, the Senate will invite him for clarification, international confidence in the America legal framework will take flight, investment rate will plummet and you can be sure, if he does not apologise and correct the odious impression. He will be impeached to safe the nation.”

The Dunning-Kruger effect is a cognitive bias wherein unskilled individuals suffer from illusory superiority, mistakenly assessing their ability much higher than is accurate. This bias is attributed to a metacognitive inability of the unskilled to recognize their ineptitude.

The danger of the Dunning-Kruger effect is that the sufferer will not know until it has initiated a domino effect upon its immediate and extended sphere of influence. The anticipation of sufferer is that he is accurate in imposition of solutions all in a bid to maintain the illusory superiority.

The effect is clearly impacting on Nigeria Independent National Electoral Commission (INEC) which was why pressure was mounted on the Chairman of INEC to shift the date of the polls with the follow up strategy of easing him out of the position without breaking any law or the agreement with the other political parties. In the roulette, all is fair as long as the beneficially of this perfidious decision is favoured in the final outcome.

The Dunning-Kruger effect becomes more feasible in the body language of the handers of the President Goodluck Ebele Jonathan which was why a certain Doyin Okupe would descend to vowing that General Muhammadu Buhari will never become the President of Nigeria because in his estimation GMB is ‘unlearned’, kudos to members of the fourth estate who poured an appropriate opprobrium on him right inside the custody of his pay master.

The Nigerian Military has also become an unwilling sufferer of the Dunning-Kruger effect in its handling of the volatility of the Nigerian political climate, rather than play the constitutional role of defending the Nigerian people.

The role as been abdicated to neighbouring countries while it turned the weapons of defence on the Nigerian people through terrorising and manipulation of electoral processes in favour of the ruling party. As demonstrated, during the Ekiti Governorship election and the recent deployment of military personnel around the person of Asiwaju Bola Hammed Tinubu with the sole purpose of intimidating and preparing the grounds for his incarceration between March 28 and April 11, 2015.

A scenario that has been implemented in Ekiti, frustrated in Osun and will definitely be frustrated in Lagos and in every state aspiring for deliverance from the domino effect of the #GEJ’s Dunning-Kruger Effect.

Unfortunately, the ruling party is suffering from the effect as it options thinned out because it could not extricate itself from #GEJ illusion. It could not organise an acceptable primaries without frustrating other contestants who could have provided a better and highly competitive option against the candidate of the opposition, just like the highly competitive race between a Jimi Agbaje and Akinwunmi Ambode. Thereby tactically giving the opposition the stage to run the show and the opposition is just making the best use of the opportunity.

The Nigerian Economy despite being the biggest by GDP estimation, is the greatest victim of the Dunning-Kruger effect, which as at today has paralysed the economy, nobody wants to invest a single Naira in Nigeria because of the volatility of its political terrain and with the threat of war and brimstone from every section of the country with particular emphasis on a certain petro-dollar billionaire militant. Since the currency of political bribery is denominated in dollars, dollar has become extremely scarce with the attendant effect on the Naira, which has since started enjoying a managed devaluation.

In practical terms, there is little on nothing the CBN and Ministry of finance can do to stem the tide but to continue to bear the brunt of international investments analysts’ opinions. Look at this scenario, imagine President Barak Obama saying “Stealing is not corruption” what do you think will happen. I can say with a degree of safety and little contradiction, the Senate will invite him for clarification, international confidence in the America legal framework will take flight, investment rate will plummet and you can be sure, if he does not apologise and correct the odious impression. He will be impeached to safe the nation.

This point made, our lot for this six years has been with Goodluck which has foster this malaise on the Nigerian people. Removing the subsidy on January 1, 2012 was the first signal, which we neglected as a nation, then comes the failure of the Commander in Chief to observe the Independent Day parade in Eagle Square because of Boko Haram and the last clincher the state of denial that over 200 School Girls were abducted.

Now, that personal interest is involved the war against terror has taking centre stage and Nigerian people must be made to wait further six weeks to know who will lead the nation from May 29, 2015. If the GEJ administration has performed has been touted all over the state controlled airwave and some select private media platforms, then why the desperation to deploy the military for civil activity. It should be a forgotten conclusion that he will win. There was no such massive deployment when we were voting him in 2011, but now that defeat looks so real, resort to use of state instrument of terror has become the fade.

The justification of continuity of D-K effect is manifestation of unpalatable hardship on all sections of the Nigerian society, which might just bring the nation to its knees, I hate to see the implosion of the Nigerian military along party or religious lines. This is the greatest threat to the Nigerian nation with unimaginable consequences.

The cure, is simply to ensure that the rigging machine is frustrated by every well-meaning Nigerian voter. It is imperative, you go out and vote for your conscience and ensure that you wait to know the outcome of every voting exercise in every polling unit, ward and senatorial zones, states and regions.

The choice is in our hand whether to continue with D-K Effect or for posterity to implement a nationalist revolution through the ballot box to frustrate a superficial revolution of rigging machine being currently fine-tuned to subvert the will of the people.

The signal will be the forceful removal, terminal leave, incarceration of INEC Chairman within the next six weeks, if and when this happens know that the election has been compromised already. Let's safe this nation from Dunning-Kruger Effect under this administration

ECONOMY: OUR DOCTORS ARE DANCING NAKED ... OKONJO-IWEALA VS SOLUDO

The words of Prof. Chukwuma Soludo and Dr, Ngozi Okonjo-Iweala are my economic bibles which I consult regularly to gauge the Barometer of the Nigerian economy.
 However, seen the kind of unprintable collation of embarrassing nomenclature both Doctors have descended into... I dare ask why are our Doctors Dancing Naked?

By the way, why have Jonah David Jang of Plateau and Femi Fani Kayode put their shreds of decency into final conundrum. Therefore, I will just laugh because their responses were just an expose in economic-illiteracy. So I laugh too.

Back to the issue, Okonjo-Iweala had said in her response to Soludo's dissection of the Nigerian economy this way, “It is a sad day for Nigeria and the economics profession that someone like Soludo, a former CBN governor, should write such an article. If Soludo wants to regain respect, he should return to the path of professionalism. He certainly needs something to improve his image from that of someone whose sojourn into national economic management ended in disaster for the banking sector. His sojourn in politics ended in overwhelming rejection by the electorate, and more recently, his sojourn abroad has put him out of touch with the reality of the Nigerian economy.”

Though Okonjo called for it, imagine Soludo saying, "By the way, can you (Okonjo) tell Nigerians why you were eased out as Finance Minister and you cried like a baby begging OBJ to still allow you remain in the Economic Management team, barely few weeks after the debt relief? Why were you eventually also removed from the economic management team if you were so important?  Ironically, President Jonathan has recycled you, with a bigger title and greater responsibilities. But the difference is that the team that did the actual work is no longer there, and the world has seen that the king is naked."

Again, I dare ask why are our Doctors Dancing Naked?
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