Nigeria’s first credit Rating Agency has assigned a ‘Bbb-‘ rating to Nova Merchant Bank Limited.
The rating reflects its strong capitalisation ratios, acceptable asset quality and strong liquidity profile. The rating takes the bank’s limited financial track record into cognisance, though it is led by an experienced management team. The subdued macroeconomic environment and its attendant impact on the banking industry is also a rating concern.
“The Nigerian banking industry continues to display resilience despite various headwinds that militate against its performance. To protect margins and remain profitable, operators are leveraging technology to boost electronic banking services, thereby increasing inflow of low-cost liabilities and improving transactional banking income.
Digitalization is also driving efficiency by lowering cost of service and extending banking services to a wider pool of Nigerians,” Agusto explained in a statement.
The rating agency added that “merchant banking segment is not exempted from the digitalisation evolution. “Operators in this space are also using technology to attract retail funds through their asset management subsidiaries.” This moderates funding cost which is typically higher than commercial banks due to regulatory restrictions.