Fitch Assigns ‘Stable Outlook’ to UBA’s Subsidiaries

Fitch Ratings has affirmed a ‘stable outlook’ on the foreign currency, long term issuer default ratings of UBA Plc’s subsidiaries in Cameroon, Ghana and Senegal.

The entities -UBA Cameroon SA, UBA Ghana Limited and UBA Senegal SA, which are some of the flagship subsidiaries of the Nigerian-headquartered United Bank for Africa Plc, are rated “B-”, as constrained by the weak operating environment within which the three subsidiaries operate.

Fitch noted that the credit ratings and the stable outlook on the subsidiaries were driven by the standalone financial strength of each of these subsidiaries, as reflected by their respective Viability Ratings.In addition, the rating agency also noted potential support from their parent, UBA Plc, if such was required. According to Fitch, the subsidiaries’ are profitable and their ability to build up capital internally was positive because it will support UBA Plc’s ambitious growth plans for the subsidiaries.

Assessing the loan portfolio of the subsidiaries, the agency noted that the three subsidiaries of UBA Plc lend to leading domestic corporate and public sector entities and such loans dominate the portfolio of UBA subsidiaries in each of the respective markets. Fitch specifically expects notable improvement in UBA Ghana’s asset quality in the near term, reflecting government’s efforts to address energy sector problem loans.

Discussing the capitalization of the subsidiaries, Fitch notes; “We view the banks’ capital buffers as modest, given the risks to which they are exposed. Reported regulatory capital ratios meet local Basel 1 requirements”.