Moody’s Investors Service, a leading global rating agency, has assigned first-time local and foreign currency issuer and deposit ratings of B2 with stable outlooks to Sterling Bank Plc, including a Counterparty Risk Assessment, CRA, of B1 (cr)/Not Prime (cr). A statement by the Agency stated that the ratings are underpinned by a b3 baseline credit assessment, BCA. BCAs are the measure of an issuer’s standalone financial strength that describes the probability of a bank defaulting on any of its rated instruments, in the absence of external support.

Moody’s said that the rating reflects the bank’s solid asset quality metrics and provision coverage, and also improvements to its Information Technology infrastructure and risk management processes as well as its high liquidity buffers and a solid deposit funding base. “These strengths are balanced against Nigeria’s Ba3, stable outlook challenging operating environment, which takes into account both the strong growth potential of the system and institutional and structural weaknesses,” explained the agency.

Continuing, it stated that the ratings incorporate a one-notch uplift from Sterling’s b3 BCA, based on its assessment of a moderate likelihood of government support in the event of need. Significantly, the agency explained that the important factor that drove its view of Sterling’s standalone assessment is the lender’s asset quality, stating that the Non-Performing Loan, NPL, levels are currently low and compare favorably against domestic and global peers. NPLs stood at 2.7 per cent as of year-end 2014 according to our adjusted ratio, which takes into account not only individually impaired loans but also loans that are overdue for more than 90 days but not reported as impaired as we do for other banks.

Also provision coverage is good, with loan loss reserves amounting to 98 per cent of doubtful credit.