OVERVIEW -- On Nov. 7, 2012, we raised the long-term sovereign credit ratings on the Federal Republic of Nigeria to 'BB-' from 'B+'. The outlook is stable. -- Consequently, we are raising the long-term counterparty credit ratings on First Bank of Nigeria, Zenith Bank, and Guaranty Trust Bank to 'BB-' from 'B+'. We are also raising the long-term Nigeria national scale ratings on the banks to 'ngAA-' from 'ngA+'. -- The stable outlook on the three banks reflects that on the sovereign and our view that the banks' business and financial profiles will remain relatively unchanged over the next 12 months. Nov 9 - Standard & Poor's Ratings Services today raised its long-term counterparty credit ratings on First Bank of Nigeria Ltd. (FBN), Zenith Bank PLC (Zenith), and Guaranty Trust Bank PLC (GTB) to 'BB-' from 'B+'. At the same time, the 'B' short-term counterparty credit ratings on all three banks were affirmed. The outlooks are stable. We also raised the Nigeria national scale long-term ratings on FBN, Zenith, and GTB to 'ngAA-' from 'ngA+' and affirmed the 'ngA-1' short-term ratings. RATIONALE The rating actions on FBN, Zenith, and GTB follow the upgrade of the Federal Republic of Nigeria (see "Long-Term Rating On Nigeria Raised To 'BB-' On Improved Fiscal And External Buffers And Strong Growth; Outlook Stable," published on RatingsDirect on Nov. 7, 2012). The sovereign upgrade reflects our view of an improvement in the government's fiscal buffer and external position, as well as ongoing reform momentum. We believe these factors will benefit the three rated Nigerian banks through the improved quality of their large exposure to the sovereign (treasury bills and other government or government-related debt account for about 25%-30% of the banks' total assets) and expected strong economic growth, especially in the non-oil sector. Standard & Poor's does not rate Nigerian banks above the foreign currency sovereign credit ratings because of the direct and indirect influence the sovereign in distress would have on a bank's operations, including its ability to service foreign currency obligations. The long-term counterparty credit rating on Zenith remains constrained by the 'BB-' foreign currency sovereign credit rating on Nigeria. The ratings on FBN and GTB reflect their SACPs of 'bb-'. FIRST BANK OF NIGERIA The stable outlook on FBN reflects the stable economic environment and our view that the bank's business and financial profiles will remain relatively unchanged over the next 12 months. We expect FBN to retain its strong market position as Nigerian banking sector leader, with relatively stable revenues and moderate geographic diversification. The bank's capitalization should remain in the 5%-6% range under Standard & Poor's risk-adjusted capital (RAC) methodology, but there could be downward ratings pressure if loans grow faster than we currently anticipate. In our view, positive economic prospects should keep asset quality and loss experience at currently good levels, although a focus on lending to midsize companies may pressure this in the next 12-18 months. We could lower the ratings if the bank's capitalization deteriorates, specifically if we forecast the RAC ratio to go to below 5% in the next 18 months. We could also lower the ratings if the inherent risks in the loan book, such as foreign currency lending and high single-name and industry risk concentrations materialize and loan-loss or asset-quality indicators deteriorate, or if loan growth reaches unsustainably high levels. We are unlikely to raise the ratings in the short term. This would only follow a sovereign upgrade and improvements in the bank's business and/or financial profiles. A sovereign downgrade would trigger a downgrade of the bank. GUARANTY TRUST BANK The stable outlook on GTB reflects the stable economic environment and our view that the bank's business and financial profiles will remain relatively unchanged over the next 12 months. In our view, the positive economic prospects in Nigeria will further support GTB's business relationships and earning capacity. We anticipate that GTB's capitalization will increase slightly over the next 12-18 months, owing to a strong earning capacity that comes from high margins and low cost of risk. We also assume that GTB will maintain its stable funding and liquidity profile. We would raise the ratings on GTB if the bank's sector and single-name concentrations were to reduce, as well as if its cost of risk becomes significantly lower than sector peers. An upgrade would also require the long-term foreign currency sovereign credit ratings to be raised. We could lower the ratings on GTB if its financial profile were to deteriorate significantly. Although unlikely, this could follow a sharp deterioration in asset quality and a change in risk appetite. A sovereign downgrade would trigger a downgrade of the bank. ZENITH BANK The stable outlook on Zenith reflects that on the sovereign and our view that the bank's business and financial profile will remain relatively unchanged over the next 12 months. We anticipate that the positive economic prospects in Nigeria will support Zenith's financial performance. We would raise the ratings on Zenith if we were to raise the ratings on the sovereign, provided that the bank maintained an SACP of at least 'bb'. A downgrade of the sovereign rating would trigger a downgrade of the bank. RELATED CRITERIA AND RESEARCH -- Bank Hybrid Capital Methodology And Assumptions, Nov. 1, 2011 -- Banks: Rating Methodology And Assumptions, Nov. 9, 2011 -- Group Rating Methodology And Assumptions, Nov. 9, 2011 -- Use Of CreditWatch And Outlooks, Sept. 14, 2009 RATINGS LIST To From First Bank of Nigeria PLC Zenith Bank PLC Guaranty Trust Bank PLC Counterparty Credit Rating BB-/Stable/B B+/Positive/B Counterparty Credit Rating Nigeria National Scale ngAA-/--/ngA-1 ngA+/--/ngA-1 N.B.-This does not include all ratings affected. Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.