Ghana: GCR Affirms Ecobank Ratings - A+ in the Long Term and A1 in the Short Term

2 September 2022

GCR Ratings ("GCR") has affirmed its strong rating of Ecobank Ghana's long and short-term issuer ratings of A+ (GH) and A1 (GH) respectively, with a positive outlook.

The rating agency also extended the rating to September 30, 2022.

In a report published on its website, the GCR stated that: "The ratings on Ecobank Ghana PLC reflect a strong business profile supported by leading market shares, stable funding sources and good levels of liquidity. The ratings also factor in improving capitalisation and increasing asset quality risk. The competitive positioning of the bank is a relative strength to the rating, benefiting from its well-established franchise and leading domestic position as a top tier financial institution".

The report said "Ecobank Ghana is one of the leading digital banks in Ghana leveraging Ecobank Transnational Incorporate (ETI)'s extensive digital strategy innovations. As such, we consider the bank to be adequately equipped to deal with the ramifications of COVID-19 from a business continuity level. Ecobank Ghana is adequately capitalised."

"We think the COVID-19 pandemic has not had as severe an impact on the bank's earnings when compared to domestic peers, and we believe the bank's forward-looking earnings capacity is still good and will support future capital generative capability," it said.

It is instructive that over the past couple of years, the bank has taken major, deliberate steps to diversify its risks by widening the scope of its borrowing customers and this has resulted in better than market average - and still improving - loan quality ratios.

On Funding and Liquidity, the GCR Ratings indicated that "The bank's funding is considered stable, with customer deposits making up 94 per cent of the group's funding base. Though deposits are predominantly demand deposits, they have historically been sticky".

On the bank's parent company, GCR said "Although not a material asset or revenue contributor, there is evidence of integration and technical support from the parent".

The bank's other shareholders are the Social Security and National Insurance Trust (16.21 per cent), and the remaining shareholders own less than two per cent.

The GCR Ratings on its outlook indicated that it expects that Ecobank Ghana's financial profile would continue to be resilient despite the strains in the operating environment and that the bank will outperform the market in terms of earnings over the rating horizon. Ecobank's previous rating history from 2013 to date has been very strong and reflects the strong capitalisation levels of the bank.

Importantly, in line with prudence, the sharp depreciation of the cedi in recent months has persuaded Ecobank to shore up its net foreign assets, including liquid foreign currency holdings as a buffer against any worsening of the overall forex shortfall that afflicted Ghana's local forex market in the first half of 2022.

Unlike the Fitch ratings which tends to cap the ratings based on the ratings assigned to the country, the GCR rating is based primarily on the bank, highlighting its strength, financial performance, sustainability, and income generating capability.

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