First Bank has been given a negative rating by international credit rating agency, Fitch, following the Central Bank of Nigeria (CBN) clampdown on the lender for replacing its Chief Executive Officer, Sola Adeduntan.
In its report addressing the Nigerian deposit money bank’s change of leadership and how it affects its outlook, Fitch gave First Bank a “B-” rating on Friday, which is a downgrade.
First Bank “B-” rating status means the risk of conducting business with the lender is higher than it was before the apex bank sacked all the management and replaced them with a new board.
Fitch’s rating signals to investors that First Bank has a limited margin safety because there’s presence of default risk in the commercial bank, which will make its capacity to meet financial commitment to creditors low.
This is a dent on the lender, and it might make seeking loans from foreign creditors more difficult than usual, “The Outlook remains Negative, reflecting FBNH’s pre-existing asset quality and capitalisation weaknesses as well as the group’s corporate governance weaknesses highlighted by the CBN. These could put pressure on the ratings.” The ratings company said.
Fitch blamed the “B-” rating on CBN’s decision, but it stated that the clampdown was tolerable. The global rating firm said First Bank’s asset quality, profitability and capitalisation remain intact regardless the remedial actions the financial regulator imposed on the bank.
“We have assessed the near-term financial impact of these actions on FBNH and FBN and believe this is tolerable at the rating level, even though the final outcome is uncertain. In our view, any remedial actions imposed by the CBN, including a potential reclassification of related-party exposures as impaired, will not have a material effect on the group’s asset quality, profitability and capitalisation.
“However, this does not consider any possible additional actions by the CBN, especially if FBN fails to implement the regulator’s corrective measures or if there were any further uncovering of corporate governance irregularities.” Fitch said.
The downgrade by Fitch follows that of Moody. Ripples Nigeria had previously reported that Moody stated First Bank’s long-term deposit ratings could be downgraded if deficiencies in the governance structures of the bank persist
By Fakoyejo Ayodeji…
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