SunTrust Bank Nigeria Limited, has been assigned a “Bb” rating by Nigeria’s foremost credit ratings agency, Agusto & Co.
According to the agency, the rating which will expire on the 30th of June 2020, is underpinned by acceptable liquidity and strong shareholders’ support.
The credit rating agency however explained that SunTrust’s rating is constrained by weak profitability, high impaired credits, concentration in the loan book, high funding costs and low market share.
On a positive note, Augusto & Co., in its ratings notification, described various initiatives introduced by the new management team to reposition the Bank as an emerging commercial bank on a growth trajectory.
According to Agusto & Co. 2019 Bank Industry Report, Nigerian banks continue to display resilience despite macroeconomic, operational and regulatory setbacks.
The agency expects the resilience to persist on the back of untapped opportunities in the large proportion of un-banked businesses and the retail segment.
Moreover, competition in the banking industry is expected to intensify, especially with the addition of recently licensed banks by the Central Bank of Nigeria.
The ratings agency therefore forsees banks that embrace technology and innovation in product development and service delivery as those who will thrive in such competitive environment.
While the large corporates continue to account for a significant portion of the Industry’s revenue, Agusto & Co. envisages a moderate rise in commercial, retail and SME income in the medium term driven by regulatory mandates from the apex bank.
Partnerships with financial technology firms and improved agency banking activities would also help drive financial inclusion in the country, they noted.
On the banking industry’s profitability outlook, Augusto & Co., says it will depend on its ability to curtail additional losses from its set to enlarge loan book, drive non-interest income through the onboarding of more clients to electronic banking platforms and increase trading activities in currency and securities.
“Cost management initiatives on variable cost components are vital to offset rising regulatory obligations, particularly AMCON levies and NDIC fees,” the ratings agency added.