Fitch Ratings has affirmed the national long-term ratings of Nigeria-based Stanbic IBTC Holdings PLC (Stanbic IBTC) and its 99.9 per cent owned subsidiary, Stanbic IBTC Bank PLC (Stanbic IBTC Bank), at ‘AAA(nga)’.
Key Rating Drivers
From the report released last week, the national ratings of Stanbic IBTC and Stanbic IBTC Bank were based on potential support from their parent company, South Africa’s Standard Bank Group Limited, which holds up to 67 per cent equity stake in Stanbic IBTC.
It stated that “The ratings reflect SBG’s ability and willingness to support Stanbic IBTC and Stanbic IBTC Bank, if required.
“SBG’s ability to support considers its ‘BB-‘ Long-Term Issuer Default Rating (IDR), but is constrained by Nigeria’s Country Ceiling of ‘B’.”
The Point reports that Fitch’s view of SBG’s willingness to support the local financial services units, factors-in Stanbic IBTC’s strategic importance to the SBG as the holding company for its leading banking and related financial services businesses in the Nigerian economy.
The report noted that Stanbic IBTC is “a key growth market for SBG’s Africa Regions strategy,” while Stanbic IBTC Bank constituted an integral part of its Nigerian operations.
“Our view of support also considers SBG’s controlling ownership of Stanbic IBTC, high operational integration with Stanbic IBTC Bank, shared branding, and Stanbic IBTC’s consistent and growing contribution to SBG’s earnings,” the report added.
The Point further reports that Stanbic IBTC’s main operating entity is the Stanbic IBTC Bank, a leading corporate bank in Nigeria, which has around 5 per cent of banking sector assets, and in turn formed 95 per cent of the holding company’s consolidated assets at end-2020.
In the rating report, Fitch expressed confidence that the holding company would support the subsidiaries should the need arise, and pitched the double leverage for Stanbic IBTC at 77 per cent as at end of year.
“Fitch believes that support from SBG, if needed, would extend equally to Stanbic IBTC and Stanbic IBTC Bank.
Double leverage for Stanbic IBTC was moderate at 77 per cent at end-1H21,” it stated.
The size of the SBG also influenced the rating as it confers on the financial institutions integration and competitive advantages.
It stated, “Stanbic IBTC Bank is highly integrated with SBG’s risk-management framework, operations and strategy.
“Being part of the largest financial services group in Africa provides Stanbic IBTC Bank with significant competitive advantages, including access to the SBG network and the ability to serve large domestic and multinational companies.
“Stanbic IBTC and Stanbic IBTC Bank benefit from intra-group liquidity and capital support, if needed, and access to wider wholesale funding sources.
Senior Debt
Fitch placed the ratings of senior unsecured obligations in line with Stanbic IBTC Bank’s National Long-and Short-Term Ratings, because “we view the likelihood of default on Stanbic IBTC Bank’s senior unsecured obligations as the same as the likelihood of default of the bank. Default on any material class of senior unsecured obligations would be treated as a default of Stanbic IBTC Bank.”
Rating Sensitivities
Some of the sensitivities on the rating were, dependence on SBG, SBGs willingness to rescue the Nigerian subsidiaries and internal limitations of the group on Fitch’s rating scale.
Fitch noted that “Factors that could, individually or collectively, lead to negative rating action/downgrade, Stanbic IBTC’s and Stanbic IBTC Bank’s National Long-Term Ratings could be downgraded following a downgrade of SBG’s Long-Term IDR.
“Downside risks to the ratings could also stem from a decline in SBG’s willingness to provide support, or from a change in SBG’s stake, resulting in a loss of control. This is not our base line scenario.”
Similarly, factors that could, individually or collectively, lead to positive rating action/upgrade were, “Stanbic IBTC’s and Stanbic IBTC Bank’s National Long-Term Ratings are at the highest level on Fitch’s national rating scale and cannot be upgraded.”
Public Ratings with Credit Linkage to Other Ratings
The ratings of Stanbic IBTC and Stanbic IBTC Bank are driven by the support from their ultimate parent, SBG.
