Johannesburg, 18 Dec 2013 — Global Credit Ratings has today assigned Ecobank Ghana Limited initial national scale Issuer ratings of AA-(GH) and A1+(GH) in the long term and short term respectively; with the outlook accorded as Stable. The rating(s) are valid until 12/2014.
Global Credit Ratings has accorded the above credit rating(s) on Ecobank Ghana Limited based on the following key criteria:
Ecobank Ghana Limited (“Ecobank” or “the bank”) is a subsidiary of Ecobank Transnational Incorporated, a pan-African financial services group, with core capital of around US$2bn, and assets amounting to over US$17bn as at 31 December 2012. The level of technical and financial support provided by the bank’s parent, coupled with the ability to leverage off the strong brand name, was favourably considered. Management is considered adequately skilled and experienced, and have been proactive in strategically positioning Ecobank as one of the leading financial institutions in Ghana.
Ecobank is now Ghana’s largest bank in terms of both assets and deposits, subsequent to its merger with Trust Bank Limited (“Trust Bank”) in F12, thus making it a systemically important institution. The bank is well capitalised with a capital base of GH¢456.2m as at FYE12, comfortably meeting the new minimum regulatory capital requirement of GH¢60m, effective December 2012. The total risk weighted capital adequacy ratio (“RWCAR”) amounted to 14.8% as at FYE12 (FYE11: 13.6%), against a prudential minimum of 10%. Arrears grew by 74.0% to GH¢74.3m as at FYE12, partly reflecting tough macro-economic conditions and a clean-up and reclassification of the acquired Trust Bank loan portfolio. Gross impaired loans amounted to 5.1% of gross loans as at FYE12, a marginal increase from the 4.9% a year before, although this ratio was partly masked by the expanded loan book. The gross non-performing loans (“NPLs”) ratio compared favourably to the industry average of 13.2%, despite the growth in arrears. Impairment coverage (including both specific and collective provisions) increased to 126.6% (FYE12: 58.1%). NPLs remained negligible relative to capital. The bank reported robust earnings growth for F12, benefiting from the synergies of the merger coupled with the growth momentum established in recent years. A pre-tax profit of GH¢186.2m was recorded for F12, up 76.5% from the previous year. Overall, the ROaE and ROaA increased to 36.9% and 4.8% respectively. Ecobank’s liquidity risk profile is tightly controlled, with liquidity maintained well within internal and regulatory targets.
Continued solid financial performance, while maintaining credit protection factors and a further strengthening of the bank’s competitive position in the domestic market could lead to an upward ratings migration. On the other hand, asset quality problems (associated with rapid loan growth), the uncertain macro-economic environment, and a weakened global economic outlook will put the ratings under pressure.
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GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; and c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument.
The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the ratings.
Ecobank Ghana Limited participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of info received was considered adequate and has been independently verified where possible.
The credit rating/s has been disclosed to Ecobank Ghana Limited with no contestation of the rating.
The information received from Ecobank Ghana Limited and other reliable third parties to accord the credit rating included the 2012 audited annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, unaudited year to date management accounts for 30 September 2013, corporate governance and enterprise risk framework, reserving methodologies, capital management policy, industry comparative data and regulatory framework, and a breakdown of facilities available and related counterparties.