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

Nume Ekeghe

Fitch Ratings has upgraded its long-term Issuer Default Rating (IDR) to ‘B-‘ from ‘CC’ and its Viability Rating (VR) to ‘b-‘ from ‘cc’ for Coronation Merchant Bank, established in 2015 to provide wholesale banking to long underserved markets.

Additionally, the Bank’s National Long-Term Rating has been upgraded to ‘BBB-(nga)’ from ‘B+(nga)’, with the outlooks on the long-term IDR and National Long-Term Rating rated stable.

The significant upgrade, the ratings agency said, reflected 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.

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

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

The rating agency further remarked: “Coronation Merchant Bank Limited’s Issuer Default Rating is driven by its standalone creditworthiness, as expressed by its VR of ‘b-’.

“The Viability Rating 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 capitalisation and its reliance on short-term wholesale funding against good asset quality metrics.”

In addition, Fitch 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.”

Commenting on the upgrade, Deputy Managing Director of Coronation Merchant Bank, Paul Abiagam, said: “Our unique four-step upgrade in both ratings by Fitch is a testament to the progress the board & management have made in directing and executing strategic initiatives.

“These 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 bank in the statement noted that the upgrade was a testament to its founder, Aigboje Aig-Imoukhuede’s vision and leadership for Coronation Merchant Bank which remains focused on leading Africa’s merchant banking subsector.

It stated: “Despite sectoral headwinds and a challenging economic environment, the bank delivered an exponential increase in Profit Before Tax (PBT), to N3.48 billion in 2023 financial year, maintaining a triple digit quarter-on-quarter growth to N1.40 billion in Q1, 2024.

“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 governance,” the merchant bank said.

According to Coronation Merchant Bank’s management, the bank is dedicated to its mission of fostering a prosperous financial future for its clients and the African continent.

“This rating upgrade underscores the bank’s commitment to excellence, prudent financial management, and its resolve to create sustainable wealth across Africa,” the bank, a recipient of national and international awards stated.