Fitch Upgrades Coronation Merchant Bank Rating to ‘B-’, Outlook Stable

Fitch Ratings has upgraded Coronation Merchant Bank Long-Term Issuer Default Rating (IDR) to ‘B-2’from ‘CC’ and its Viability Rating (VR) to ‘b-’ from ‘cc’.

Fitch has also upgraded the bank’s National Long-Term Rating to ‘BBB-(nga)’ from ‘B+(nga)’, with the Outlooks on the Long-Term IDR and National Long-Term Rating rated Stable.

The upgrade reflects the robust improvement in the bank’s capital position, following the completion of a rights issue and the sale of foreign currency-denominated equity investments, a statement on the ratings stated.

Fitch, noted that the substantial upgrade reflects the agency’s view that funding instability risks had receded, due to the strengthening of Coronation Merchant Bank’s capital base.

The ratings agency also attributed the assessment to an improvement in the bank’s core profitability, aided by the softening of the Cash Reserve Ratio (CRR) regime for merchant banks.

“Coronation Merchant Bank Limited’s Issuer Default Rating (IDR) is driven by its standalone creditworthiness, as expressed by its VR of ‘b-’. The Viability Rating (VR) balances the concentration of Coronation Merchant Bank’s operations in Nigeria’s challenging operating environment, a niche franchise and business model, high credit concentrations, moderate capitalization and its reliance on short-term wholesale funding against good asset quality metrics,” the rating agency further stated.

Fitch also highlighted the bank’s strong asset quality metrics, noting that “despite challenging macroeconomic conditions, Coronation Merchant Bank has recorded no impaired loans since converting to a merchant bank in 2015, reflecting its prudent underwriting standards and risk controls, and the lower-risk nature of its trade finance loans.”

Paul Abiagam, Deputy Managing Director of Coronation Merchant Bank, commenting on the upgrade, said: “Our unique 4-step upgrade in both ratings by Fitch is a testament to the progress the Board and Management have made in directing and executing strategic initiatives, that have effectively reinforced our financial stability and operational resilience.

“It reflects the hard work and dedication of our entire team and underscores our shared devotion to maintain high standards of financial management and deliver exceptional value to our stakeholders.”

The statement said that inspired by Founder, Aigboje Aig-Imoukhuede’s vision and leadership, Coronation Merchant Bank remains focused on leading Africa’s merchant banking subsector.

It further noted that despite sectoral headwinds and a challenging economic environment, the bank delivered an exponential increase in Profit Before Tax (PBT), to ₦3.48 billion in 2023 financial year, maintaining a triple digit quarter-on-quarter growth to ₦1.40 billion in Q1 2024.

It said this enhanced performance also reflects the successful efforts of the Board of Directors led by Chairman Mr. Tunde Folawiyo to strengthen the Bank’s executive leadership team with strategic appointments including Deputy Managing Director Paul Abiagam, Chief Financial Officer Arini Awotunde, and Chief Risk Officer Saheed Alamutu, amongst others.

“These additions to the executive team continue to drive the bank’s growth, while reinforcing its commitment to excellence in risk management, financial oversight, and overall corporate governanc”, it added..

The statement said the rating upgrade underscores the Bank’s commitment to excellence, prudent financial management, and its resolve to create sustainable wealth across Africa.