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Fitch Ratings has taken action on Union Bank of Nigeria PLC’s (UBN) Issuer Default Ratings (IDRs), Viability Rating (VR), and National Ratings by placing them on Rating Watch Negative (RWN). This decision comes in the wake of the Central Bank of Nigeria’s (CBN) recent dissolution of the board and management of three Nigerian banks, including UBN.
The CBN’s intervention was driven by various concerns such as regulatory non-compliance, corporate governance failures, violation of conditions tied to banking licenses, and engagement in activities jeopardizing financial stability. New executives, including chief executive officers, have been appointed by the CBN to oversee the operations of these banks.
Fitch Ratings noted that Union Bank of Nigeria’s RWN reflects the uncertainties surrounding the CBN’s intervention, potential further regulatory actions, and the negative impact on the bank’s standalone credit profile. Key areas of concern include corporate governance risks and liquidity pressures due to potential funding instability.
The rating agency anticipates resolving the RWN within six months once there is greater clarity regarding the CBN’s intervention and its implications for UBN’s credit profile. A downgrade and resolution of the RWN could stem from additional regulatory interventions, such as imposing restrictions on UBN’s activities, fines, or regulatory findings revealing weaker asset quality than initially reported.
Furthermore, a downgrade might occur due to UBN facing funding instability, such as a deposit run or the unavailability of additional liquidity sources. The ratings could be affirmed and removed from RWN if UBN operates normally under the new management in the medium term, without additional regulatory interventions or financial profile implications.
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