Fitch Ratings has affirmed Wema Bank Plc’s long-term issuer default rating at ‘B-’ with a stable outlook.

A statement obtained on Monday said its national long-term rating had been upgraded to ‘BBB(nga)’ from ‘BBB-(nga)’, reflecting the bank’s increased creditworthiness relative to that of other issuers in Nigeria.

The statement said the issuer default ratings of Wema were driven by its standalone creditworthiness, as expressed by its viability rating of ‘B-’.

According to a report by Proshare, Fitch Ratings said the VR reflected the concentration of the bank’s activities within Nigeria’s challenging operating environment, aggressive loan and balance-sheet growth – which it expected to continue over the medium term.

It also reflected Fitch’s expectation of a significant improvement in capitalisation and leverage, due to a material rights issue due to be concluded by the end of 2021.

Fitch said its stable outlook reflected it view that risks to Wema’s credit profile were captured by the current rating, with sufficient headroom under its base case to absorb the fallout from operating-environment pressures.

It said, “Operating conditions in Nigeria are gradually stabilising. Fitch forecasts 1.9 per cent GDP growth in 2021, following a 1.8 per cent contraction in 2020.

“Our baseline scenario is that business volumes and earnings should continue to rebound in 2021, while the rally in oil prices is also a positive factor.

“Nevertheless, Fitch said downside risks linger generally, given inherently volatile market conditions, with banks still exposed to foreign currency shortages, potential further currency devaluation, rising inflation and regulatory intervention by the Central Bank of Nigeria.”

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It added that Wema had two per cent of domestic banking-system assets of the end-2020.

Its market shares had improved slightly in recent years, reflecting aggressive growth, which had resulted in a significant increase in leverage, the statement said.

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