The report, released Thursday, noted that Ecobank Nigeria
IDRs are driven by its standalone creditworthiness, as expressed by its
Viability Rating (VR).
The VR reflects the constraint of Nigeria’s challenging
operating environment and modest core capital buffers amongst others. This is
balanced by company profile strengths as well as a solid funding profile and
good foreign-currency liquidity, which is enhanced by prudent liquidity
management by the Ecobank group.
According to Fitch, “the Stable Outlook on ENG’s Long-Term
IDR reflects our view that the bank has sufficient headroom at its current
rating to absorb moderate shocks from sustained downside risks to the operating
environment, the heightened level of risk in doing banking business in Nigeria
and the ensuing risks to its financial performance (particularly asset quality)
over the next 12-18 months. The Stable Outlook also reflects our expectations
that capitalisation will remain resilient over this period with the bank
maintaining adequate buffers over the minimum regulatory requirements”.
Fitch Rating reported that the VR benefits from ENG’s
company profile strengths of being part of the leading pan-African Ecobank
group. ENG is a 100% owned subsidiary of Ecobank Transnational Incorporated
(ETI; B-/Stable).
ETI is a regional bank holding company with fully-fledged
banking subsidiaries in 33 African countries (collectively the group). The
group also has a banking license in France and representative offices in Addis
Ababa, Johannesburg, Beijing, London, and Dubai. The group’s operations are
highly integrated, with all entities connected to a common operating platform
and risk management framework, and common branding.
ENG is a material subsidiary for ETI, and its largest single
entity, contributing to 23% of group assets at end-9M20. ETI continues to
implement a turnaround strategy at Ecobank Nigeria, having deleveraged and
de-risked the bank in recent years, although it returned to growth in 2020 and
plans above-sector-average loan growth in the medium term. Fitch noted that
ENG’s management quality is a relative strength, with ETI appointing
experienced bankers to Ecobank Nigeria’s senior team.
“ENG has a solid funding profile, with low-cost current and
savings accounts reaching 58% of total deposits at end-9M20 helping the bank to
reduce its cost of funding. It has achieved good deposit growth through the
expansion of digital channels and its financial inclusion initiatives. Retail
and SME deposits to account for 58% of total customer deposits at end-9M20,
which results in reasonable deposit concentration, with the top 20 customer
deposits representing 29% of the total”. The report stated.
Fitch Ratings also views ENG’s liquidity management as
prudent with contingency plans in place. Local-currency liquidity is
underpinned by a high share of liquid assets (cash, interbank placements and
sovereign securities) representing more than 50% of total assets at end-9M20.
ENG’s foreign-currency funding benefits from sizeable interbank deposits, which
represented about 15% of total funding at end-9M20.
More than half of these deposits (about USD400 million) came
from ETI’s affiliates at end-9M20. This reflects the group’s well-established
inter-affiliate short-term deposit placement programme (IAP), amounting to
USD650 million at end-1H20, which provides ENG with a significant competitive
advantage compared with most other Nigerian banks, as ENG is able to rely on
IAP funding when foreign-currency liquidity conditions temporarily tighten in
Nigeria.