(The following statement was released by the rating agency)
Nov 1 - Fitch Ratings has affirmed Togo-based Ecobank Transnational
Incorporated (ETI)'s, the holding company of the Ecobank
group (Ecobank), Long-term Issuer Default Rating (IDR) at 'B-' with a Stable
Outlook, Short-term IDR at 'B', Viability Rating (VR) at 'b-', Support Rating at
'5' and Support Rating Floor at 'NF'. A full list of rating actions is at the
end of this rating action commentary.
RATING ACTION RATIONALE: IDRs and VR
The affirmation of ETI's IDRs with a Stable Outlook and VR reflect its resilient
performance, the progress made with respect to the integration of Oceanic Bank
Nigeria (Oceanic; a Nigerian bank acquired in H211) into Ecobank Nigeria (EN)
and related gradual return to profitability of EN (44% of group assets at
end-H112), and improvements in the risk management framework. The IDRs continue
to reflect ETI's low capital position, despite the recent new equity raised.
RATING DRIVERS: IDRs and VR
ETI's IDRs are based on its individual risk profile and therefore are aligned
with its VR. ETI's VR reflect its low capital levels in a fast-growing but still
volatile operating environment, vulnerable to economic and political shocks; it
also takes into account the tight liquidity at holding level. The VR also
reflects satisfactory profitability, which is supported by geographical
diversification, the group's adequate liquidity as well as improvement in asset
quality (although largely due to sale of problematic loans).
ETI has raised substantial equity (USD350m) in 2011-2012. Nevertheless, Fitch
considers that ETI's consolidated capitalisation (Fitch core capital: 8.5% at
end-H112) is low, given potential asset quality volatility across the group's
subsidiary banks. Fitch considers that ETI's double leverage (investment into
its subsidiaries relative to ETI's equity, 125.5% at end-H112) is high. ETI has
a large potential repayment due in 2014 of a bullet convertible loan from
Nedbank (25% of ETI's liabilities at the holding level) if not converted or
ETI's standalone performance was adequate and is likely to remain stable for
2012 as EN, its main operating subsidiary, is returning to profitability. ETI''s
consolidated profitability and efficiency indicators have weakened in H112 but
reflected Oceanic's integration in 2011 and H112 and should improve in 2013.
ETI's non-performing loans (+90 days overdue loans) ratio stood at 5.6% at
end-H112 and has strongly benefited from the write-off and sales of problematic
loans since 2011, essentially to AMCON, the state-owned Nigerian company set up
to help restore Nigerian banks' balance sheet. Fitch believes that some asset
quality migration could result from ETI's restructured loans (classified as
standard) and watch loans.
ETI was one of the largest pan-African banking groups present in 32 countries in
Africa at end-H112. The countries were non-rated or rated between 'B' and 'BB-'
(69.5% of the group's total assets). ETI aims at having a banking subsidiary
among the top three banks in each of the countries where it has operations. At
end-H112, 13 of the subsidiaries (representing 36% of group assets) ranked at
least third by total assets in their respective countries.
SENSITIVITIES: IDRs and VR
Weaker capitalisation as result of aggressive expansion, material deterioration
of asset quality or a sizeable drop of EN's performance, could lead to a
downgrade of ETI's VR. Destabilised liquidity could also trigger a negative
rating action. Triggers for an upgrade include a track record of improved
performance at ETI and stabilised asset quality combined with materially
RATING DRIVERS AND SENSITIVITIES: Support Rating and Support Rating Floor
Fitch considers that ETI's main operating subsidiary, EN, may benefit from
potential limited support from Nigeria ('BB-'/Stable) if required given that it
has become one of the largest banks in Nigeria after the acquisition of Oceanic.
However, Fitch estimates that potential sovereign support from Nigeria is
unlikely to extend to ETI, if required. Fitch believes that the largest
shareholders (AMCON, the International Financial Corporation and Public
Investment Company of South Africa) are long term but financial investors only
and their ownership in ETI is not strategic for the businesses of the respective
shareholders. Therefore Fitch estimates that institutional support cannot be
The Support Rating and Support Rating Floor could be upgraded if there was any
change in assumptions around the increased propensity or ability of Nigeria or
of other countries in which ETI operates to provide support. An upgrade of the
Support Rating could also result from ETI becoming a strategic investment for
some of the shareholders combined with majority ownership in ETI and/or close
integration of ETI's operations with those of the potential strategic
The rating actions are as follows:
Long-term IDR affirmed at 'B-'; Outlook Stable
Short-term IDR affirmed at 'B'
Viability Rating affirmed at 'b-'
Support Rating affirmed at '5'
Support Rating Floor affirmed at 'NF'
(Caryn Trokie, New York Ratings Unit)