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Moody’s has confirmed the credit rating of Access Bank and Sterling Bank, but downgraded that of Bank of Industry (BoI) after the ratings agency concluded its ratings review on the three banks.

According to a statement released earlier this week, Moody’s confirmed the standalone baseline credit assessment (BCA) of B3 for Sterling Bank and B2 for Access Bank, but downgraded the long-term issuer rating of the Bank of Industry to B1 stable.

The primary driver for confirming the BCA for Access Bank and Sterling Bank is Moody's expectation of the resilience of the banks' standalone credit profiles despite the challenging operating environment in Nigeria. (The BCA represents Moody’s opinion regarding a bank’s probability of standalone failure in the absence of external support).

“While lower oil prices will continue to exert pressure on corporate borrowers and on the domestic economy more generally, we expect any deterioration in asset quality and liquidity at Access and Sterling to be manageable and within the tolerance levels assumed in their standalone ratings given the strength of their respective risk management processes as well as their capital and liquidity buffers,” Moody’s said.

However, the ratings agency said it downgraded Access Bank's local currency and foreign currency deposit ratings to B1 and B2, from Ba3 and B1, respectively, and also downgraded BoI's issuer rating to B1 from Ba3.

“These downgrades reflect the weakened capacity of the Nigerian government to provide support to the banks in case of need, as indicated by the downgrade of the government’s issuer rating to B1, stable, from Ba3, as well as the subsequent lowering of the rating ceilings for Nigerian issuers,” Moody’s said.

Last week, Moody’s downgraded Nigeria’s sovereign credit rating from Ba3 to B1 because of increased external vulnerability caused by low oil prices, budget execution risks associated with a transition into a less oil-dependent federal budget, and elevated interest burden over two years while the government grows its non-oil tax receipts.