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Fitch affirms 3 UBA subsidiaries ‘B-’, outlooks stable

By on February 21, 2017

Fitch Ratings has affirmed the Long-Term Issuer Default Ratings (IDR) of United Bank for Africa Cameroon (UBA CAM), United Bank for Africa Senegal (UBA SEN) and United Bank for Africa Ghana (UBA Ghana) at ‘B-’. The Outlooks are Stable.

A full list of rating actions is listed at the end of this commentary.

The three banks are subsidiaries of Nigeria’s United Bank for Africa Plc (UBA; B/Stable/b). UBA controls 100% of UBA CAM, 86% of UBA SEN and 91% of UBA Ghana.

The Long-Term IDRs of UBA CAM, UBA SEN and UBA Ghana are driven by their standalone financial strength, as defined by their ‘b-’ Viability Ratings (VR), and are also underpinned by Fitch’s view of potential support from UBA. The VRs of the three subsidiaries are constrained by the weak environments in which they operate.

“The economies of the three countries are fairly underdeveloped, banking sectors operate with large single-name concentrations and limited capital buffers, in our view, and the prudential regulations for banks, though improving, fall short of international best practice guidelines. Fitch rates Cameroon ‘B’/Stable and Ghana ‘B’/Negative.

“The VRs also consider the banks’ limited franchises.

“Oil-related loans represent 30% of UBA CAM’s loan portfolio. Performance indicators are strong at the banks, particularly in UBA Ghana, and their balance sheets are liquid. This is credit-positive because it provides some protection against the considerable liquidity risks arising from notable asset and liability maturity gaps,” the Fitch rating showed