Fitch Affirms Stanbic Bank Uganda at ‘B+’; Outlook Negative

Fitch Affirms Stanbic Bank Uganda at 'B+'; Outlook Negative

Fitch Ratings – London – 22 Apr 2022: Fitch Ratings has affirmed Stanbic Bank Uganda Limited’s (SBU) Long-Term Issuer Default Rating (IDR) at ‘B+’. The Rating Outlook is Negative.

Fitch has withdrawn SBU’s Support Rating as it is no longer relevant to the agency’s coverage following the publication of its updated Bank Rating Criteria on 12 November 2021. In line with the updated criteria, we have assigned a Shareholder Support Rating (SSR) of ‘b+’. Key Rating Drivers

SBU’s IDRs reflect a limited probability of support, if required, from the bank’s ultimate parent, South Africa-based Standard Bank Group Limited (SBG; BB-/Stable), which has an indirect 80% shareholding. The Negative Outlook reflects Uganda’s ‘B+’ Long-Term IDR, and zero uplift to the Country Ceiling.

SBU’s ‘b’ Viability Rating (VR) reflects the concentration of its operations in Uganda’s weak operating environment, characterised by very low GDP per capita and a weak operational risk index score, despite a relatively strong business and financial profile.

SBU’s National Ratings reflect its creditworthiness relative to other issuers in Uganda. SBU’s ‘AAA(uga)’ National Long-Term Rating is the highest possible on Uganda’s national scale, and considers potential support available from SBG. The Stable Outlook reflects our view that SBU’s creditworthiness compared to other domestic issuers is unlikely to change over a one- to two-year period.

Shareholder Support: SBU’s Long-Term IDR is one notch below that of SBG, reflecting SBU’s strategically important role in the group’s regional operations. SBG’s ability to provide support is underpinned by SBU’s small size (only 1% of SBG’s assets at end-2021).

Risks to Operating Environment Recovery: Second-order effects from the Russia-Ukraine conflict and lingering pandemic risks could negatively impact the economic recovery given Uganda’s small and undiversified economy, low vaccination rates and oil import reliance.

Leading Domestic Franchise: SBU is the largest bank in Uganda, accounting for 22% of banking sector assets at end-November 2021. Its leading domestic franchise is underpinned by a strong corporate and investment banking (CIB) business, relationships with the leading corporates operating in Uganda, and other benefits derived from being part of a large pan-African banking group.

Stable Asset Quality: SBU’s impaired loans (Stage 3 loans under IFRS 9) ratio was stable at 4.6% at end-2021 (end-2020: 4.7%) supported by write-offs (1.7% of average loans). Total loan loss allowances/impaired loans were reasonable and stable at 99%. Loans under repayment moratoria, mainly in the real estate, education and industrial sectors, increased to 8% of gross […]

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