Agusto & Co. affirms the ‘A-’ rating assigned and attaches a negative outlook to Union Bank of Nigeria Plc’s Series 1 and 2 Combined Issuance of ₦13.5 billion Fixed Rate Direct Senior Unsecured Issue under the 2018 Registered ₦100 billion Debt Issuance Programme.
Agusto & Co. hereby affirms the ‘A-’ rating assigned to the combined Series 1 (3-year) 15.5% and Series 2 (7-year) 15.75% senior unsecured bond issuance (“the Issue” or “the Bond”) by Union Bank of Nigeria Plc (“UBN”, “the Issuer” or “the Bank”). The rating assigned mirrors the standalone “A-” credit rating assigned to UBN by Agusto & Co. Limited and the seniority status of the Issue over other unsecured obligations. The rating assigned to the Issuer reflects an adequate capitalisation, improved asset quality, enhanced profitability and a good liquidity profile. Constraining the rating are the Bank’s low profitability, the impact of unfavourable regulations and prevailing macroeconomic headwinds elicited by the COVID-19 pandemic.
Due to the increasing level of economic uncertainties triggered by COVID19 and the adverse impact on the economy, the near-term outlook for the banking industry is weak. Given the vulnerabilities in the Issuer’s earnings and particularly its asset quality (relatively high stage 2 and 3 loans), a negative outlook is attached to the rating UBN and accordingly to the Issue’s rating. Agusto & Co will closely monitor the outlook and rating as the impact of the pandemic on the operating terrain evolves.
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