Johannesburg, 3 Oct 2013 — Global Credit Ratings has upgraded the long term national scale and affirmed the short term national scale issuer ratings assigned to Ecobank Nigeria to A-(NG) and A2(NG) respectively; with the outlook accorded as Stable. The rating(s) are valid until 9/2014.
Global Credit Ratings has accorded the above credit rating(s) on Ecobank Nigeria based on the following key criteria:
Ecobank Nigeria Limited (“Ecobank” or “the bank”) is a subsidiary of Ecobank Transnational Incorporation (“ETI”), and, as such, the likely support from its parent (demonstrated by several capital injections in the past) was favourably considered. The bank’s competitive position in the local market has been enhanced by its acquisition of Oceanic Bank International Plc (“Oceanic”), seeing it rank among the 10 largest banks in Nigeria, by asset size and branch network.
Although asset quality improved in F12, with the non-performing loan ratio dropping to 4.6% (F11: 5.8%), this was chiefly supported by a further sale of impaired loans, totalling N17bn, to AMCON, and write-offs totalling N6.2bn. Whilst the bank’s risk management processes has undergone significant change over the past year, the effectiveness of the bank’s internal loan recovery system will only be tested in F13, as AMCON has suspended all further purchases of impaired loans from banks.
Ecobank achieved a net comprehensive income of N18.4bn in F12, representing a notable 33.7% growth over the International Financial Reporting Standards (“IFRS”) based results for F11. Benefitting from the higher interest rates that prevailed for most part of the year, robust returns on investment securities saw total operating income grow by 142%. Growth at the net profit after tax (“NPAT”) level was, however, constrained by a sharp increase in impairment losses and operating costs. Consequently, the bank’s ROaE and ROaA dropped from 18.4% and 1.8% in F11, to 16.1% and 1.5% in F12, respectively.
The bank’s enlarged branch network has enhanced its access to cheaper retail deposits, comprising 52% of the bank’s deposit book at end-F12; hence, the bank’s average cost of funds dropped to 3.9% in F12.
Ecobank’s capital adequacy also improved, following the injection of US$400m in Tier I capital by ETI in F12, bringing the bank’s risk weighted capital adequacy ratio to 18% (against the regulatory minimum of 10%).
Positive movements: Establishing a good profitability track record and an improvement in asset quality would support a positive rating action.
Negative movements: Negative rating reaction would result from a deterioration in profitability, asset quality and other key performance indicators.
|NATIONAL SCALE RATINGS HISTORY|
|Initial rating (Nov/2006)|
|Long term: A+(NG);|
|Outlook: Positive outlook|
|Last rating (Apr/2013)|
|Long term: BBB+(NG); Short term: A2(NG)|
|Outlook: Positive outlook|
|Adeyinka Olowofela/Julius Adekeye|
|+23 41 462 2545|
|Sector Head: Financial Institution Ratings|
|+27 11 784 1771|
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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; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument.
Ecobank Nigeria participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The credit rating/s has been disclosed to Ecobank Nigeria with no contestation of the rating.
The information received from Ecobank Nigeria and other reliable third parties to accord the credit rating included the latest available audited annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, full year detailed budgeted financial statements, most recent year to date management accounts, 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.