International rating agency Fitch has downgraded the viability ratings of three Ghanaian banks to “CCC”.
The Banks are Ecobank Ghana Limited, Guaranty Trust Bank (Ghana) Limited (GTB Ghana), and United Bank for Africa (Ghana) Limited (UBA Ghana).
The downgrade came after the rating agency downgraded Ghana’s creditworthiness to “CCC” or Junk status on August 10, 2022.
On key drivers of the downgrade, Fitch said “The downgrade of the three banks’ VRs follows the downgrade of Ghana’s Long-Term IDRs as the banks’ standalone credit profiles are closely linked to that of the sovereign. This reflects the concentration of their operations within Ghana, strong reliance on sovereign-derived income, and high exposure to the sovereign relative to capital. The VRs are one notch below their ‘ccc+’ implied VRs, reflecting the operating environment/sovereign rating Constraint.”
It added that “The banks have low gross loans/customer deposits ratios, are almost entirely funded by domestic customer deposits, and therefore less prone to capital flight”, a situation that has been attributed to the cedi’s depreciation and the country’s inflation rate of 31.7%.
Ecobank Ghana’s Shareholder Support Ratings (SSRs) was rated at ‘ccc+’ and that of GTB Ghana and UBA Ghana at ‘b-‘.
“The Long-Term Issuer Default Rating (IDR) of Ecobank Ghana has therefore been downgraded to ‘CCC+ from ‘B-‘ while those of GTB Ghana and UBA Ghana have been affirmed at ‘B-‘. The Outlook on the Long-Term IDRs is Stable,” Fitch noted on its website on August 22, 2022.
The rating agency further noted that it “has simultaneously withdrawn Ecobank Ghana’s ratings for commercial reasons and will no longer provide ratings and analytical coverage for Ecobank Ghana.”
Viability ratings measure the probability of a company being in business within the next 12 months.