Fitch upgrades Coronation Merchant Bank rating significantly to ‘B-’

• Outlooks on Long-Term IDR, National Long-Term rating put at STABLE 

Onome Amuge

Fitch Ratings has upgraded Coronation Merchant Bank’s financial standing, issuing a more favourable long-term Issuer Default Rating (IDR) of “B-”, a step up from its previous “CC” rating. In addition, the bank’s Viability Rating (VR) was also upgraded to “b-”, a significant improvement from the previous “cc” rating.

Coronation Merchant Bank’s positive performance has also led to a significant upgrade in its national long-term rating, which now stands at “BBB-(nga)” from “B+(nga)” with the outlooks on the Long-Term IDR and National Long-Term Rating adjudged as stable. The upgrade in ratings by the renowned credit rating agency underscores the bank’s notable strides in strengthening its capital position, following the completion of a rights issue and the sale of foreign currency denominated investments. 

These advancements, it noted, were a direct result of the successful rights issue, which allowed the bank to raise funds from existing shareholders, as well as the sale of foreign currency-denominated equity investments, which further bolstered its capital reserves. 

Moreso, the substantial rating upgrade, according to Fitch Ratings, is predicated on the agency’s evaluation of the bank’s enhanced capital position, which has effectively mitigated its exposure to funding instability risks. This view is further underpinned by the agency’s assessment of Coronation Merchant Bank’s improved core profitability, which was supported by the  softening of the Cash Reserve Ratio (CRR) requirements for merchant banks in Nigeria.

The rating agency further remarked, “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.”

In addition to the improved capital position, Fitch Ratings highlighted the exceptional asset quality metrics of Coronation Merchant Bank. It noted that despite the tough economic environment in Nigeria, the bank has maintained a commendable record of zero impaired loans since transitioning to a merchant bank in 2015. This, it stated, is a testament to the bank’s vigilant underwriting practices, its rigorous risk management systems, and the comparatively lower-risk nature of its trade finance loan portfolio.

Commenting on the upgrade, Paul Abiagam, deputy managing director of Coronation MerchantBank, said the unique 4-step upgrade in both ratings by Fitch is a testament to the progress the board & management have made in directing and executing strategic initiatives that have effectively reinforced its 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,” Abiagam stated. 

As indicated by the commendable financial metrics, the visionary leadership of founder, Aigboje Aig-Imoukhuede, has proven to be a guiding light for Coronation Merchant Bank, spurring the bank’s steadfast pursuit of excellence in the African merchant banking subsector.

Amidst a volatile environment in the banking sector, and persistent economic challenges, Coronation Merchant Bank exhibited remarkable strength and tenacity in delivering a significant surge in its Profit Before Tax (PBT), growing by a substantial increment from the previous  financial year to N3.48 billion in 2023.

Demonstrating continued resilience and market proficiency, the bank maintained this momentum, sustaining triple digit quarterly growth, with its Profit Before Tax in Q1 2024 rising to N1.40 billion.

The bank’s impressive performance has also been attributed to the strategic leadership of its board of directors, led by chairman Tunde Folawiyo. The robust leadership is seen to have guided the organisation through vital structural changes, including the appointment of key executives such as Paul Abiagam as deputy managing director, Arini Awotunde as chief financial officer, and Saheed Alamutu as chief risk officer, amongst others.

According to Coronation Merchant Bank, the fortification of its executive team with these strategic appointments not only serves as a springboard for its growth trajectory, but also reaffirms the bank’s dedication to upholding the highest standards of risk management, financial oversight, and overall corporate governance.

The wholesale bank said it remains dedicated to its mission of fostering a prosperous financial future for its clients and the African continent, noting that “This rating upgrade underscores its commitment to excellence, prudent financial management, and its resolve to create wealth across Africa.