The ratings on Ecobank Ghana PLC (“Ecobank Ghana”) according to GCR reflected 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 improving asset quality risk.

According to GCR, the bank’s competitive position is strong, with a cost of funds of less than 2 per cent, benefiting from being part of the broader Ecobank Transnational Incorporated’s (“ETI”) group, which owns 68.93 per cent of the bank’s shares.

ETI is a pan-African conglomerate with banking operations spanning over 33 countries.

Ecobank Ghana’s approximate market share for deposits in full-year 2021 stood at 13.2 per cent (FY20: 13.1 per cent), while the gross advances market share stood at 11.0 per cent (FY20: 10.4 per cent), supporting its solid domestic footprint.

The bank’s revenue is stable, supported by a healthy internal capital generation of 29 per cent in FY21(FY20:35 per cent).

Total operating revenue grew from 985m in June 2021, to 1.186 billion in June 2022.

The growth was mainly driven by net interest income and general banking fees.

The cost-to-income ratio stood at 46 per cent in June 2022, in comparison to 39.6 per cent in June 2021.

Ecobank Ghana is adequately capitalised, with a GCR capital ratio of 20.6 per cent on December 31, 2021 (FY20:18.6 per cent), while also reporting a CAR above the D-SIB minimum regulatory requirement of 15 per cent.

However, the bank’s CAR ratio dipped to 16 per cent in June 2022, largely due to the single large dividend paid once a year, albeit it only will reflect in the third quarter of 2022.

The GCR capital ratio is expected to be around 20 per cent by the end of the year.

Although the bank’s asset quality has come under pressure due to the COVID-19 pandemic, the NPL ratio improved from 8 per cent at June 2021 to 5 per cent in June 2022.

However, 20 per cent of the Non-Performing Loans have been restructured as certain sectors were hit hard by the pandemic, namely construction, real estate, and hospitality sectors.

The bank’s gross loan and advances increased from 5.3billion in 2020 to 6.2 billion in 2021 with loan loss reserves of 531.3million

“We expect the cost of risk to remain below 10 per cent within the short to medium-term. Concomitantly, the bank’s credit losses have registered at moderate levels of below 5 per cent historically, and we expect them to remain the same in the next 12-18 months. Foreign currency (FCY) loans accounted for 31.9 per cent of gross loans and advances in 2022 (FY20: 34.6 per cent), with most of the facilities extended to the manufacturing sector, constituting 19.2 per cent of the bank’s loan book”, GCR said.

“We also note the rising risk of the Ghanaian sovereign. In the unanticipated event of a sovereign default and haircut of local currency government debt, there could be significant capital erosion across the banking sector. Positively, sovereign debt accounts for 12.3 per cent of total assets for Ecobank Ghana”, it added.