Fitch Rates Coronation Merchant Bank Limited at 'B-'; Outlook Negative

(The following statement was released by the rating agency)
Fitch Ratings-London-24 August 2020:
Fitch Ratings has assigned Nigeria-based Coronation Merchant Bank Limited
(CMB) a Long-Term Issuer Default Rating (IDR) of 'B-' with a Negative Outlook,
Viability Rating (VR) of 'b-' and National Long-Term Rating of 'BBB(nga)'. A
full list of ratings is detailed below.
Key Rating Drivers
IDRs AND VR

CMB's Long- and Short-Term IDRs are driven by its Standalone Credit Profile as
determined by its VR. The bank's VR reflects Nigeria's (B/Negative)
challenging and volatile operating environment, which influences CMB's
financial and non-financial rating factors. CMB's company profile has a high
influence on its ratings and reflects its niche and developing franchise, and
structural funding and liquidity weaknesses, given its reliance on short-term
wholesale deposits and market funding.

The Negative Outlook on CMB's Long-Term IDR reflects our view that prevailing
operating conditions create downside risks to our assessment of the bank's
funding and liquidity profile as well as pressure on asset quality and
earnings, but there is a degree of tolerance in these factors.

Established in 2015, CMB is a leading independent merchant bank engaged in
corporate and trade finance, domestic capital markets and investment banking.
Fitch's assessment of CMB's company profile reflects its moderate size, niche
focus, developing franchise and limited record of performance.

Management quality is a relative strength, with the senior team demonstrating
a high degree of credibility, experience and depth commensurate with the
complexity of the business. CMB's strategy is well defined, although execution
could be hampered under current difficult operating conditions, in Fitch's
view.

CMB's primary risk exposure is to short-term (up to one year) self-liquidating
corporate loans and traditional trade finance and Nigerian treasury bills.
This is balanced by CMB's good management of credit and market risks.
Operational risk is inherent in the business but losses are low.

CMB has good asset quality, reporting a zero impaired loans (IFRS 9 Stage
3)/gross ratio at end-1H20, which has also been the case for the last four
financial years. This reflects the bank's lower risk business model and risk
management capability. Given the severity of the economic crisis, we expect a
modest rise in Stage 2 and Stage 3 loans over the next 18 months. Asset
quality risks are exacerbated by very high credit concentrations by borrower
and significant foreign-currency-denominated trade loans (forming 60% of total
loans at end-1H20).

CMB remained profitable in 1H20, although operating income declined by 20%,
reflecting a lower monetary policy rate, declining yields on government
securities, substantially higher obligatory cash reserve requirements and a
fall in trading income. Earnings pressure was softened by a fall in cost of
funding due to CMB diversifying its funding mix. Fitch expects earnings
pressures to persist in the next 12-18 months because of lower client activity
and weak macroeconomic conditions. Profitability will be further pressured by
rising loan impairment charges, reflecting modest credit quality
deterioration.

CMB is well-capitalised, reporting Tier 1 and total capital adequacy ratios of
16.6% and 17.2%, respectively, at end-1H20. However, capital ratios have
modestly declined from end-2019 due to fast growth and currency devaluation.
Fitch expects further modest capital pressure to come from lower earnings. Our
assessment of capital also considers CMB's small absolute capital base, which
exposes the bank to even moderate capital eroding losses. Given its business
model, in the event of capital pressure we believe that CMB could de-leverage
its balance sheet, if needed.

CMB's funding structure is a relative rating weakness as the bank is funded
entirely by price and confidence sensitive wholesale funding, including
corporate deposits, short-term bank borrowings and commercial paper. Around
37% of CMB's non-equity funding was in foreign currency at end-1H20.

Corporate deposits are highly concentrated by name and around 17% were in
foreign currency at end-1H20. Given the nature of its trade finance business,
the bank has a reliance on short-term foreign currency funding (around 25% of
its total foreign currency funding), which could decline if sovereign risks
rise, leading to pressure on foreign currency liquidity. Balance sheet
liquidity is underpinned by the short-term nature of the bank's trade finance
assets and large holdings of liquid assets. The bank is highly liquid in local
currency but conversion to foreign currency is challenging under current
market conditions.

SUPPORT RATINGS AND SUPPORT RATING FLOOR

Fitch believes that sovereign support to CMB cannot be relied on, given
Nigeria's weak ability to provide support, particularly in foreign currency.
Therefore, the Support Rating Floor (SRF) of all Nigerian banks is 'No Floor'
and their Support Ratings (SRs) are '5'. This reflects our view that senior
creditors cannot rely on receiving full and timely extraordinary support from
the Nigerian sovereign if any of the banks become non-viable.

NATIONAL RATINGS

CMB's National Long- and Short-Term Ratings reflect its creditworthiness
relative to other issuers in Nigeria.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating
action/upgrade:

Upside for ratings is currently limited given difficult operating conditions
and risks to funding and liquidity due to market volatility, as reflected in
the Negative Outlook.

Factors that could, individually or collectively, lead to negative rating
action/downgrade:

The most immediate downside risk to CMB's ratings is any material worsening in
operating conditions that presents a clear risk to our assessment of the
bank's VR, specifically for asset quality, earnings and funding and liquidity.
Tightening foreign currency liquidity mainly due to adverse market conditions
and reduced access to foreign currency funding could result in a downgrade.
Marked deterioration in loan quality or persistently lower earnings, leading
to lower loss absorption capacity and limiting internal capital generation,
would also be credit negative.

A strategic shift towards higher-risk exposures or increased concentrations
could also result in a downgrade, although this is not our base case given the
bank's stable record to date.

ESG CONSIDERATIONS

ESG issues are credit neutral or have only a minimal credit impact on the
entity(ies), either due to their nature or the way in which they are being
managed by the entity(ies). For more information on Fitch's ESG Relevance
Scores, visit www.fitchratings.com/esg.
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond
issuers have a best-case rating upgrade scenario (defined as the 99th
percentile of rating transitions, measured in a positive direction) of three
notches over a three-year rating horizon; and a worst-case rating downgrade
scenario (defined as the 99th percentile of rating transitions, measured in a
negative direction) of four notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on
historical performance. For more information about the methodology used to
determine sector-specific best- and worst-case scenario credit ratings, visit
[https://www.fitchratings.com/site/re/10111579]
Date of Relevant Committee 28 July 2020
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The
principal sources of information used in the analysis are described in the
Applicable Criteria.

Coronation Merchant Bank Limited; Long Term Issuer Default Rating; New Rating;
B-; RO:Neg
; Short Term Issuer Default Rating; New Rating; B
; Local Currency Long Term Issuer Default Rating; New Rating; B-; RO:Neg
; National Long Term Rating; New Rating; BBB(nga)
; National Short Term Rating; New Rating; F3(nga)
; Viability Rating; New Rating; b-
; Support Rating; New Rating; 5
; Support Rating Floor; New Rating; NF

Contacts:
Primary Rating Analyst
Mahin Dissanayake,
Senior Director
+44 20 3530 1618
Fitch Ratings Ltd
30 North Colonnade, Canary Wharf
London E14 5GN

Secondary Rating Analyst
Kurt Boere,
Senior Analyst
+44 20 3530 2707

Committee Chairperson
Olga Ignatieva,
Senior Director
+7 495 956 6906

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. 28 Feb 2020) (including rating assumption
sensitivity) (https://www.fitchratings.com/site/re/10110041)
National Scale Rating Criteria (pub. 08 Jun 2020)
(https://www.fitchratings.com/site/re/10121358)

Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
(https://www.fitchratings.com/site/dodd-frank-disclosure/10133966)
Solicitation Status
(https://www.fitchratings.com/site/pr/10133966#solicitation)
Endorsement Status
(https://www.fitchratings.com/site/pr/10133966#endorsement_status)
Endorsement Policy
(https://www.fitchratings.com/site/pr/10133966#endorsement-policy)

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS
(HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS). IN ADDITION, THE
FOLLOWING HTTPS://WWW.FITCHRATINGS.COM/RATING-DEFINITIONS-DOCUMENT
(https://www.fitchratings.com/rating-definitions-document) DETAILS FITCH'S
RATING DEFINITIONS FOR EACH RATING SCALE AND RATING CATEGORIES, INCLUDING
DEFINITIONS RELATING TO DEFAULT. PUBLISHED RATINGS, CRITERIA, AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT
INTERESTS ARE AVAILABLE AT HTTPS://WWW.FITCHRATINGS.COM/SITE/REGULATORY
(https://www.fitchratings.com/site/regulatory). FITCH MAY HAVE PROVIDED
ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES.
DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH RATINGS WEBSITE.

Copyright © 2020 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its
subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824,
(212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole
or in part is prohibited except by permission. All rights reserved. In issuing
and maintaining its ratings and in making other reports (including forecast
information), Fitch relies on factual information it receives from issuers and
underwriters and from other sources Fitch believes to be credible. Fitch
conducts a reasonable investigation of the factual information relied upon by
it in accordance with its ratings methodology, and obtains reasonable
verification of that information from independent sources, to the extent such
sources are available for a given security or in a given jurisdiction. The
manner of Fitch's factual investigation and the scope of the third-party
verification it obtains will vary depending on the nature of the rated
security and its issuer, the requirements and practices in the jurisdiction in
which the rated security is offered and sold and/or the issuer is located, the
availability and nature of relevant public information, access to the
management of the issuer and its advisers, the availability of pre-existing
third-party verifications such as audit reports, agreed-upon procedures
letters, appraisals, actuarial reports, engineering reports, legal opinions
and other reports provided by third parties, the availability of independent
and competent third- party verification sources with respect to the particular
security or in the particular jurisdiction of the issuer, and a variety of
other factors. Users of Fitch's ratings and reports should understand that
neither an enhanced factual investigation nor any third-party verification can
ensure that all of the information Fitch relies on in connection with a rating
or a report will be accurate and complete. Ultimately, the issuer and its
advisers are responsible for the accuracy of the information they provide to
Fitch and to the market in offering documents and other reports. In issuing
its ratings and its reports, Fitch must rely on the work of experts, including
independent auditors with respect to financial statements and attorneys with
respect to legal and tax matters. Further, ratings and forecasts of financial
and other information are inherently forward-looking and embody assumptions
and predictions about future events that by their nature cannot be verified as
facts. As a result, despite any verification of current facts, ratings and
forecasts can be affected by future events or conditions that were not
anticipated at the time a rating or forecast was issued or affirmed.
The information in this report is provided "as is" without any representation
or warranty of any kind, and Fitch does not represent or warrant that the
report or any of its contents will meet any of the requirements of a recipient
of the report. A Fitch rating is an opinion as to the creditworthiness of a
security. This opinion and reports made by Fitch are based on established
criteria and methodologies that Fitch is continuously evaluating and updating.
Therefore, ratings and reports are the collective work product of Fitch and no
individual, or group of individuals, is solely responsible for a rating or a
report. The rating does not address the risk of loss due to risks other than
credit risk, unless such risk is specifically mentioned. Fitch is not engaged
in the offer or sale of any security. All Fitch reports have shared
authorship. Individuals identified in a Fitch report were involved in, but are
not solely responsible for, the opinions stated therein. The individuals are
named for contact purposes only. A report providing a Fitch rating is neither
a prospectus nor a substitute for the information assembled, verified and
presented to investors by the issuer and its agents in connection with the
sale of the securities. Ratings may be changed or withdrawn at any time for
any reason in the sole discretion of Fitch. Fitch does not provide investment
advice of any sort. Ratings are not a recommendation to buy, sell, or hold any
security. Ratings do not comment on the adequacy of market price, the
suitability of any security for a particular investor, or the tax-exempt
nature or taxability of payments made in respect to any security. Fitch
receives fees from issuers, insurers, guarantors, other obligors, and
underwriters for rating securities. Such fees generally vary from US$1,000 to
US$750,000 (or the applicable currency equivalent) per issue. In certain
cases, Fitch will rate all or a number of issues issued by a particular
issuer, or insured or guaranteed by a particular insurer or guarantor, for a
single annual fee. Such fees are expected to vary from US$10,000 to
US$1,500,000 (or the applicable currency equivalent). The assignment,
publication, or dissemination of a rating by Fitch shall not constitute a
consent by Fitch to use its name as an expert in connection with any
registration statement filed under the United States securities laws, the
Financial Services and Markets Act of 2000 of the United Kingdom, or the
securities laws of any particular jurisdiction. Due to the relative efficiency
of electronic publishing and distribution, Fitch research may be available to
electronic subscribers up to three days earlier than to print subscribers.
For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty
Ltd holds an Australian financial services license (AFS license no. 337123)
which authorizes it to provide credit ratings to wholesale clients only.
Credit ratings information published by Fitch is not intended to be used by
persons who are retail clients within the meaning of the Corporations Act 2001
Fitch Ratings, Inc. is registered with the U.S. Securities and Exchange
Commission as a Nationally Recognized Statistical Rating Organization (the
"NRSRO"). While certain of the NRSRO's credit rating subsidiaries are listed
on Item 3 of Form NRSRO and as such are authorized to issue credit ratings on
behalf of the NRSRO (see https://www.fitchratings.com/site/regulatory), other
credit rating subsidiaries are not listed on Form NRSRO (the "non-NRSROs") and
therefore credit ratings issued by those subsidiaries are not issued on behalf
of the NRSRO. However, non-NRSRO personnel may participate in determining
credit ratings issued by or on behalf of the NRSRO.