(The following statement was released by the rating agency)
Fitch Ratings-London-October 29: Fitch Ratings has affirmed Nigeria-based Bank
of Industry Limited's (BOI) Long-Term Issuer Default Rating (IDR) at 'B+'. The
Outlook for the IDR is Stable. A full list of rating actions is at the end of
this rating action commentary.
KEY RATING DRIVERS
IDRS, SUPPORT RATING, SUPPORT RATING FLOOR AND NATIONAL RATINGS
BOI is a state-owned development bank and its Long-Term IDR is equalised with
the Nigerian sovereign rating (B+/Stable) and driven by its Support Rating Floor
(SRF) of 'B+', which reflects a limited probability of support from the Nigerian
sovereign if required. The SRF considers BOI's 99.9% state ownership, policy
role and strategic importance to Nigeria's economic and industrial development.
The Stable Outlook on BOI's Long-term IDR mirrors the Outlook on the sovereign.
BOI's funding is long-term and sourced from the Central Bank of Nigeria and
leading multilateral development banks (MDB) - the African Development Bank
(AAA/Stable) and African Export-Import Bank (BBB-/Stable). Loans provided by
these MDBs are guaranteed by the Nigerian state.
BOI's strong capital ratios are prudent given the bank's sensitivity to the
volatile economic environment. As part of its budget allocation, the government
has committed NGN10 billion of new capital to BOI each year from 2019. Dividend
pay-outs are fairly low.
Profitability is not a key objective but the government requires the bank to be
financially sustainable. BOI reported net income of NGN32.5 billion for 2018.
BOI continues to generate good net interest margins owing to its low cost of
funding and reasonable overall performance metrics, supported by fairly low loan
impairment changes.
Fitch does not assign a Viability Rating to BOI, similar to our practice for
other development banks. This is because its business model is entirely
dependent on the support of the state and, in our view, its unique policy role
cannot be carried out on a commercial basis.
RATING SENSITIVITIES
IDRS, SUPPORT RATING, SUPPORT RATING FLOOR AND NATIONAL RATINGS
BOI's IDRs, Support Rating and SRF are sensitive to changes in Nigeria's
sovereign ratings. The bank's ratings are also sensitive to a reduced propensity
of the authorities to support the bank. This could be indicated by a change in
BOI's policy role, such as a shift into commercial activities, or a material
reduction in government ownership. We have no reason to believe such changes are
likely in the foreseeable future.
BOI's National Ratings are sensitive to a change in Fitch's opinion of BOI's
creditworthiness relative to other credits in Nigeria.
The rating actions are as follows:
Long-Term IDR affirmed at 'B+', Outlook Stable
Short-Term IDR affirmed at 'B'
National Long-Term Rating affirmed at 'AA+(nga)'
National Short-Term Rating affirmed at 'F1+(nga)'
Support Rating affirmed at '4'
Support Rating Floor affirmed at 'B+'
Contact:
Primary Analyst
Janine Dow
Senior Director
+44 203 530 1464
Fitch Ratings Limited
30 North Colonnade
London E14 5GN
Secondary Analyst
Kurt Boere
Senior Analyst
+44 203 530 2707
Committee Chairperson
Mark Young
Managing Director
+44 203 530 1318
Media Relations: Louisa Williams, London, Tel: +44 20 3530 2452, Email:
louisa.williams@thefitchgroup.com.
Additional information is available on www.fitchratings.com
Applicable Criteria
Bank Rating Criteria (pub. 12 Oct 2018)
https://www.fitchratings.com/site/re/10044408
National Scale Ratings Criteria (pub. 18 Jul 2018)
https://www.fitchratings.com/site/re/10038626
Short-Term Ratings Criteria (pub. 02 May 2019)
https://www.fitchratings.com/site/re/10073011
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/site/dodd-frank-disclosure/10090131
Solicitation Status
https://www.fitchratings.com/site/pr/10090131#solicitation
Endorsement Policy
https://www.fitchratings.com/regulatory
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