Moody’s downgrades rating for Zenith, 8 Nigerian banks

Moody’s Investors Service has downgraded Zenith and eight other Nigerian banks that it rates, saying the action followed its downward review of Nigeria’s rating last week.

The banks involved are Access Bank Plc, Zenith Bank Plc, First Bank of Nigeria Limited, United Bank for Africa Plc, Guaranty Trust Bank Limited, Union Bank of Nigeria plc, Fidelity Bank Plc, FCMB (First City Monument Bank) Limited and Sterling Bank Plc.

The international rating agency downgraded to Caa1 from B3 the long-term deposit ratings, issuer ratings as well as the senior unsecured debt ratings (where applicable), all the nine lenders, it said in a statement issued on Tuesday.

Moody’s also changed the outlook to stable on the long-term deposit ratings, issuer ratings as well as senior unsecured debt ratings (where applicable) of the nine rated Nigerian banks, it said.

“Today’s rating actions follow Moody’s downgrade on 27 January 2023 of the long-term issuer rating of the Government of Nigeria to Caa1 from B3, and change in the outlook to stable,” it said in a statement.

It explained that the downgrade of the long-term ratings of nine Nigerian banks reflected a combination of two factors – the weakening operating environment, as captured by Moody’s lowering of its Macro Profile for Nigeria to “Very Weak” from “very weak+”; and the inter linkages between the sovereign’s weakened creditworthiness (as indicated by the downgrade of the sovereign rating to Caa1 from B3) and the banks’ balance sheets, given the banks’ significant holdings of sovereign debt securities.

“Rated Nigerian banks have significant direct and indirect exposure to the Nigerian sovereign, with a significant portion of their assets located in the country, and sovereign debt holdings representing 28% of their aggregate total assets as of June 2022,” it said.