GT Bank gets B- rating with stable outlook from Fitch

tration of their operations in Nigeria. The ‘b-‘ VRs are one notch below the ‘b’ implied VR, re ecting the operating environment/sovereign rating constraint.

end-2022.

charges.

Rating agency, Fitch, has a rmed Nigeria-based Guaranty Trust Holding Company Plc’s (GTCO) and its core banking subsidiary Guaranty Trust Bank Limited’s (GTB) Long-Term Issuer Default Ratings (IDRs) at ‘B-‘ with Stable Outlooks.

It also a rmed the National Long-Term Ratings at ‘AA’ and assigned Stable Outlooks to them. A full list of rating actions is below.

It stressed that the Long-Term IDRs of GTCO and GTB are driven by their standalone creditworthiness, as expressed by Viability Ratings (VRs) of ‘b-‘.

The VRs, it said, are constrained by Nigeria’s Long-Term IDRs of ‘B-‘ due to their high sovereign exposure relative to capital and the concen-

Sizeable Franchise: Fitch pointed out that GTCO is Nigeria’s fth-largest banking group, representing 7% of domestic banking system assets at end-2022.

Revenue diversi cation is also strong, with non-interest income representing 44% of revenues in 2022.

High Sovereign Exposure

It stated that single-borrower concentration is large, with the 20-largest loans representing 61% of gross loans at

According to Fitch, the oil and gas exposure (end-2022: 37% of loans) and foreign-currency lending (57% of net loans) are materially higher than the banking system average. Sovereign exposure through securities and placements with the CBN, including cash reserves, is high (around 250% of FCC at end-2022).

Strong Pro tability

Again, GTCO delivered stronger pro tability than peers, with an operating return of 6.5% of risk-weighted assets (RWAs) in 2022.

Pro tability was supported by a wide net interest margin, strong non-interest income, sound operating eciency and moderate loan impairment

Challenging operating environment

Fitch pointed out that banks in Nigeria continue to contend with US dollar shortages and the Central Bank of Nigeria’s (CBN) highly burdensome cash reserve requirement. It, therefore, expects reform progress under the new administration, including the elimination of fuel subsidies and gradual liberalisation of the naira.

“However, we see a risk of a sharp naira depreciation due to large disparities between the o cial and parallel exchange rates. The CBN has increased its policy rate by 700bp since April 2022 (currently 18.5%) due to rising in ation (22% in April 2023).