Ecobank gets stable outlook rating
Ecobank Transnational Incorporated (ETI) has received a Long-term Issuer Default Rating (IDR) at ‘B-’ with a Stable Outlook.
Fitch Ratings, the global rating agency affirmed the bank's short-term IDR at ‘B’, its Viability Rating (VR) at ‘b-’ as well as its Support Rating Floor at ‘No Floor’.
A statement from Fitch yesterday said the affirmation of ETI’s IDRs with a Stable Outlook and VR reflected the banking group’s improving financial performance due to its growing footprint across Africa.
It however noted: 'The ratings continue to reflect ETI’s weak capital position, despite recently raised equity and its high risk profile reflecting a wide network across several low rated sovereigns. ETI’s IDRs are based on its standalone risk profile and are therefore aligned with its VR.'
ETI raised $350 million new equity in 2012, which led to an improving Fitch Core Capital ratio of 12.2 per cent at the end of first half 2013.
'ETI’s high double leverage is the result of past acquisitions and is unlikely to improve until 2014 if/when Nedbank exercises its option on a $285 million convertible loan and acquires additional shares to take a 20 per cent stake in the holding company.
'ETI has a solid franchise and is one of the largest pan-African banking groups with fully fledged banking subsidiaries in 32 countries in Africa. These countries are either not rated or rated between ‘B’ and ‘BB-’ highlighting the risks in lending to emerging industries and sectors. ETI’s largest subsidiary is Ecobank Nigeria (about 40 per cent of group assets) which means that the group’s prospects are to a large extent linked to that of the performance of its Nigerian operations, which are evolving,' it added.
It listed other rating drivers for the bank to include weak operating efficiency, high operational risks and high related-party lending compared to Fitch Core Capital.