Bank Rating Methodology

Agusto & Co. currently assigns short term ratings to Nigerian Banks on a solicited basis. Our ratings are an assessment of the financial condition of the bank and its capacity to repay deposit obligations (in local currency) as at when due. Overall, our rating provides an opinion on the credit risk of the rated bank. Our ratings are independent and forward looking for a business cycle or a maximum of 12 months.

In assigning a rating, we consider both qualitative and quantitative factors. Each rating category (qualitative & qualitative) is assigned a predetermined weight, and is scored in the rating process. This ensures a balance between the various factors considered in arriving at the rating.

Information relied upon include those gathered from the entity being rated through meetings, company visits as well as audited financial statements (annual, interim or quarterly). We also rely on regulatory industry and company reports, publicly available information as well as in-house data. We apply a top-down approach, with emphasis on firm specifics.

Our methodology incorporates

• Macroeconomic Analysis

We center on macroeconomic & political trends and the current state of the economy to ascertain how key variables impact the industry.

• Industry Analysis 

We consider the nature and structure of the banking industry, with particular emphasis on regulation, the competitive landscape, financial condition and key risk & success factors.  Our analysis enables us determine the degree of operating risk faced by the rated bank, establish industry trends and thus facilitate a company to industry comparison.

• Obligor Analysis

Agusto & Co. lays emphasis on the financial strength of the rated bank. In determining financial strength, we consider the bank's asset mix, the quality of its risk assets and the bank's credit risk management practice.  We recognize that risk management practice is indicative of future state of the bank's assets.  Agusto & Co. also examines the rated bank's profitability, earnings capacity, the size and adequacy of its capital, liquidity & liability ge....... >> more

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