Moody’s Investors Service, has re-affirmed the resilience of the Sterling Bank franchise by maintaining the lender’s standalone Baseline Credit Assessment (BCA) ratings of B3.
This cheery news came hours after the lender’s share price appreciated by 3.25 per cent in today’s trading on the Nigerian Stock Exchange (NSE) to close at N1.59 per share, indicating that that investors’ confidence remained strong.
BCAs are inputs to Moody’s joint-default analysis for ratings on issuers subject to extraordinary government support. It measures the financial strength of issuers subject to extraordinary government support, which can include banks, sub-sovereigns and government-related corporate issuers (GRIs). It explicitly excludes the likelihood of extraordinary government support in the event that a bailout is required, but does incorporate support as may be necessary for ordinary operations.
The rating agency in a statement made available to newsmen in Lagos, expressed confidence that with its current profile, Sterling Bank will remain resilient in the face of more challenging operating conditions given its adequate capital and liquidity buffers.
The agency in the statement explained, “Sterling Bank’s B2 deposit ratings continue to incorporate one notch of rating uplift on account of government support as the Bank’s ratings remain lower than the sovereign rating and its foreign currency deposit rating is now in line with the lowered foreign currency deposit ceiling of B2”.
Specifically, Moody’s rated Sterling Bank b3 in Adjusted Baseline Credit Assessment; B1 (cr) in Long-Term Counterparty Risk Assessment; B2 in Long-Term Issuer Rating (Local and Foreign Currency); B2 in Long-Term Deposit Rating (Local and Foreign Currency) while the outlook changed to stable.
It would be recalled that the agency in a statement last March, noted that the ratings of the lender reflects its “solid asset quality metrics and provision coverage, improvements to its Information Technology (IT) infrastructure and risk management processes as well as its high liquidity buffers and a solid deposit funding base”.
According to Moody’s, the primary driver for confirming Sterling Bank’s BCAs is Moody’s expectation of the resilience of the banks’ standalone credit profiles despite the challenging operating environment. “While lower oil prices will continue to exert pressure on corporate borrowers and on the domestic economy more generally, we expect any deterioration in asset quality and liquidity at Sterling Bank to be manageable and within the tolerance levels assumed in their standalone ratings given their capital and liquidity buffers”, the agency stated.
Commenting, the Bank’s Executive Director, Finance & Strategy, Mr. Abubakar Suleiman, noted that the reaffirmation of the rating is a testimony of the resilient of the Bank to remain strong and professional despite the challenging operating environment in which it operate.