Nigeria’s first credit Rating Agency and a pan African leader in credit reports, Agusto & Co. limited whose strong credibility presence and ratings are globally accepted in Nigeria and across the globe has just assigned a ‘Bbb-‘ rating to Nova Merchant Bank Limited.
The rating assigned to Nova Merchant Bank Limited (‘NovaMBL’ or ‘the Bank’) reflects its strong capitalization ratios, acceptable asset quality and strong liquidity profile. The rating takes into cognizance the Bank’s limited financial track record, 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.
The merchant banking segment is not exempted from the digitalization 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. Although merchant banks have a low market share of the Industry’s assets at 0.22%, the segment has expanded over the last few years, with five licensed operators as at FYE2018 from a nil position in 2012. Merchant banks are competing efficiently by taking advantage of a wide range of financial services conferred by the license. Such services include investment banking, corporate finance, asset management, advisory, wealth management, capital markets and securities & trading activities.
Going forward, as the economy opens up, we see opportunities for capital raising, mergers & acquisitions and corporate financing which merchant banks can leverage to grow market share and render good returns to shareholders.
Bala Augie
