Fitch upgrades First Bank to ‘B’, outlook stable

Fitch Ratings has upgraded the Long-Term Issuer Default Ratings (IDRs) of FirstBank Limited and that of its parent company, First Bank Holdings Plc to ‘B’ from ‘B-’, citing key performance indices including improved capitalization, asset quality and healthy profitability.

In a statement announcing the new ratings, Fitch said: Fitch Ratings has upgraded FBN Holdings Plc’s (FBNH) and First Bank of Nigeria Ltd’s (FBN) Long-Term Issuer Default Ratings (IDRs) to ‘B’ from ‘B-’. The Outlooks are Stable. Fitch has also upgraded their Viability Ratings (VR) to ‘b’ from ‘b-’.

“The upgrade of the Long-Term IDRs follows that of the VRs, reflecting that corporate governance irregularities publicly raised by the Central Bank of Nigeria (CBN) in April 2021, including two longstanding related-party exposures, have largely been addressed and therefore risks to capitalisation have receded, helped by strong internal capital generation since the irregularities were raised.

“Fitch has withdrawn FBNH’s and FBN’s Support Ratings and Support Rating Floors as they are no longer relevant to the agency’s coverage following the publication of its updated Bank Rating Criteria on 12 November 2021. In line with the updated criteria, we have assigned Government Support Ratings (GSR) of ‘no support’ (ns) to both issuers.”

Explaining further, Fitch said: “FBN is the third-largest bank in Nigeria, representing 11% of domestic banking-system assets at end-2021. A strong franchise supports a stable funding profile and a low cost of funding. Revenue diversification is strong, with noninterest income representing 48% of operating income in 2021..

“FBNH delivers healthy profitability, as indicated by an operating return on risk-weighted assets (RWAs) averaging 2.6% over the past four years (4% in 2021, underpinned by large recoveries on a previously written-off loan). Earnings benefit from a low cost of funding and strong non-interest income but are constrained by a high cost-to-income ratio (74% in 2021) and significant loan impairment charges (LICs) in recent years.”