International rating agency Fitch said there is capital weaknesses at First Bank, which has a significant influence on the bank’s ratings.
Fitch made the evaluation in the results of the stress test it conducted on Nigerian banks.
The results, published on 5 April, show among Nigerian banks Zenith Bank Plc is the strongest, while First Bank and some others have a weak capital.
Explaining the criteria it used to arrive at the results, the internationally recognised rating agency said it is based on capitalisation and capacity to absorb losses.
It stated that medium and large banks collectively could withstand a 100% increase in non-performing loans (NPLs) but small banks (assets less than NGN500 billion) would struggle to withstand even modest NPL
The rating agency said in its analysis of a report by CBN: “… medium and large banks collectively could withstand a 100% increase in non-performing loans (NPLs) but small banks (assets less than NGN500 billion) would struggle to withstand even modest NPL deterioration.
“In our own assessment of the banks we rate, which are mostly large (assets more than NGN1 trillion), capacity to absorb losses through capital varies considerably.
“Zenith Bank Plc is stronger than the rest, while capital weaknesses at First Bank National and Diamond Bank have a significant influence on their ratings,” it added.
“All Nigerian bank ratings are in the highly speculative ‘B’ range, but even so capitalisation is an important differentiator. The scores we assign, based on capitalisation and leverage metrics across the sector, are low, but vary considerably,” the agency explained.