Fitch Ratings has established Ecobank Nigeria Limited’s (ENG) Long-Term Issuer Default Rating (IDR) at ‘B-’ with a Stable Outlook.
Fitch has upgraded the bank’s National Short-Term Rating to ‘F2(nga)’ from ‘F3(nga)’.
The IDRs of Ecobank are driven by its standalone creditworthiness, as expressed by its Viability Rating (VR) of ‘b-,’ stating that the bank has a moderate market share of the country’s banking sector assets, but its franchise benefits from being a subsidiary of Ecobank Transnational Incorporated, a large pan-African banking group with operations spanning 33 countries across sub-Saharan Africa (SSA).
Fitch expects profitability to improve comparatively with receding asset-quality pressures and lower LICs. The rating agency recounted that Ecobank’s loans have declined in recent years, stressing that it does not see a high risk of the largest Stage 2 loans, concentrated within the oil and gas sector, of becoming impaired.
It noted that its asset-quality assessment is positively influenced by a substantial amount of non-loan assets, largely comprising government securities and cash reserves at the Central Bank of Nigeria (CBN).
Fitch detected that “ENG’s total capital adequacy ratio (CAR) of 19.6 per cent at the end the first quarter of 2021 maintains a comfortable buffer above the 10 per cent regulatory requirement for a bank with a national licence and the bank’s tangible leverage ratio of 10.7 per cent at the end of the first quarter of 2021, which compares favourably with that of peers’’.
Impaired loans net of specific loan loss allowances represented a significant 46 per cent of Fitch Core Capital at the end of the first quarter of last year, but risks to capital are mitigated by strong collateral coverage and recovery expectations of the two large upstream impaired loans.”