Banking
S&P Affirms Ecobank’s Ratings, Says Bank Will Sustain Growth
By Dipo Olowookere
The ‘B-/B’ long- and short-term issuer credit ratings on Togo-based Ecobank Transnational Incorporated (ETI) have been affirmed by S&P Global Ratings.
Also, the firm its ‘B/B’ long- and short-term issuer credit ratings on Ecobank Nigeria Ltd with both outlooks stable.
A statement issued by S&P explained that the affirmation reflected its expectation that Ecobank group’s financial performance will improve gradually over the next 12-24 months, with lower problematic assets and slightly higher profitability on the back of more stable macroeconomic conditions in key operating markets.
In 2017, the group returned to profitability as a result of a significant decline in cost of risk and reduced operating costs.
“We expect the group’s asset quality indicators to continue improving over the next 12-24 months, including nonperforming loans (NPLs; loans overdue by more than 90 days) falling to around 7%-8% of total loans and coverage of NPLs by provisions increasing above 90%.
“To that end, the group is strengthening its credit risk management framework and monitoring processes,” the rating agency said.
It noted that under its base-case scenario, Ecobank will also maintain relatively elevated credit provisions at around 2.6% of total loans as it strengthens its NPL coverage ratio and transitions to International Financial Reporting Standard (IFRS) 9.
According to S&P, coverage of NPLs by provisions improved to 81% in the first half of 2018 from 52% at year-end 2017, incorporating $299 million of IFRS 9 provisions.
“We still view the group’s weak loss experience and exposure to moderate coverage of NPLs compared with peers as negative for its credit profile.
“We expect the group’s return on equity will average 15% over the next 12-24 months, which would somewhat support a stabilization of the group’s risk-adjusted capital (RAC) ratio around 3.3%-3.6% over the same period, assuming no dividend distribution. We see capitalization as a weakness for the group’s overall credit profile,” the statement said.
S&P noted Ecobank’s strong footprint in Africa and the new management team’s efforts to address its asset quality issues, stabilising its financial profile, and shift its strategy toward a targeted country-by-country approach rather than geographic expansion as a priority over earnings.
The rating agency pointed out that the funding base of Ecobank and its subsidiaries were in line with peers’, maintaining a reasonable level of liquidity.
“All of the group’s subsidiaries are largely funded by short-term customer deposits (total deposits accounted for 90% of the funding base and 173% of total loans on June 30, 2018), with a preference for retail and nonfinancial corporate current and savings accounts to lower the cost of funds. There is fungibility of liquidity within the group.
“Furthermore, at 134% as of June 30, 2018, the group’s stable funding ratio compares well with peers’. The group’s broad liquid assets-to-short-term wholesale funding ratio was at 7.7x at end-June
2018, while its net broad liquid assets covered 46% of short-term deposits at the same date.
“Overall, we assess the group credit profile at ‘b’. Our rating on ETI, the non-operating holding company, is only one notch below the group credit profile (rather than the standard two notches), since we do not see ETI as currently vulnerable to non-payment, or dependent upon favourable business, financial, and economic conditions to meet its financial obligations in the next 12 months.
“In addition, the group’s double leverage has stabilized around 100%, which we consider as moderately high. We understand that the group targets a double leverage ratio close to 100% over the next 12-24 months. We also consider Ecobank Nigeria a core subsidiary of the Ecobank Group.
“Ecobank Nigeria accounted for approximately 30% oftotal group assets at year-end 2017. Therefore, our ratings on Ecobank Nigeria reflect thewider group credit profile,” the statement said.
However, S&P warned that it would lower the rating on Ecobank Nigeria if the group’s RAC ratio fell below 3% or if the group exhibited a higher cost of risk than currently expected.
“We would also lower the rating on Ecobank Nigeria if we took a similar rating action on Nigeria.
“Finally, we would lower the ratings on ETI if we were to notice a significant increase in double leverage above 120%.
“An upgrade of Ecobank Nigeria or ETI appears unlikely over the next 12 months and would require a significant strengthening of capitalization or asset quality,” S&P disclosed.
By Aduragbemi Omiyale
The Central Bank of Nigeria (CBN) has reaffirmed that the old and new Naira notes will continue to be used for financial transactions in the country beyond December 31, 2024.
There had been rumours that the old and redesigned N200, N500, and N1,000 banknotes would no longer be legal tender from Wednesday, January 1, 2025, because the central bank would phase out the notes in compliance with a Supreme Court judgement of November 29, 2023.
But the apex bank, in a statement signed by its acting Director of Corporate Communications, Mrs Hakama Ali, on Friday, clarified that the apex court’s judgement being cited did not authorise the bank to phase out the banknotes by the end of this year.
According to her, the court allowed the CBN to leave the old and new notes to be used concurrently until it decides to gradually phase out the former.
The central bank’s spokesperson urged members of the public to disregard claims suggesting the old series of these denominations would cease to be valid at the end of this year.
She urged them to continue to accept all Naira notes for daily transactions, encouraging banks to also adopt alternative payment methods such as electronic channels to reduce the pressure on physical cash usage.
“The Central Bank of Nigeria (CBN) has observed the misinformation regarding the validity of the old N1000, N500, and N200 banknotes currently in circulation.
“In line with the bank’s previous clarifications and to offer further assurance, the CBN wishes to reiterate that the subsisting Supreme Court ruling granted on November 29, 2023, permits the concurrent circulation of all versions of the N1000, N500, and N200 denominations of the Naira indefinitely.
“For the avoidance of doubt, all versions of the naira, including the old and new designs of N1000, N500, and N200 denominations, as well as the commemorative and previous designs of the N100 denomination, remain valid and continue to be legal tender without any deadlines,” the statement noted.
By Adedapo Adesanya
Access Bank Plc, the banking subsidiary of Access Holdings Plc, has entered into a binding agreement with South African-based Bidvest Group Limited for the acquisition of 100 per cent equity stake in Bidvest Bank Limited.
The deal for the 24-year-old South African lender is due to be completed in the second half of 2025, upon regulatory approval.
This shows Access Bank’s further expansion plans in line with goals set by its late founder, Mr Herbert Wigwe.
The agreement to acquire 100 percent stake in Bidvest Bank reflects Access Bank’s commitment to strengthening its footprint in South Africa and consolidating on its position as the continent’s gateway to global markets as it seeks to optimise the benefits of recent acquisitions and accelerate its transition towards a greater focus on efficiencies.
Bidvest Bank, founded in 2000 is a niche and profitable South African financial institution providing a diverse range of services, including corporate and business banking solutions and diverse retail banking products.
As of its year ended June 2024, Bidvest Bank reported total assets equivalent of $665million and audited profit before tax of $20million.
Upon conclusion of this acquisition, Bidvest Bank will be merged with the bank’s existing South African subsidiary to create an enlarged platform to anchor the regional growth strategy for the SADC region.
This is coming just as the bank opened a new branch in Malta as part of efforts to focus on international trade finance after obtaining a banking licence from the European Central Bank (ECB) and the Malta Financial Services Authority (MFSA).
Access Bank said the licence marks a transformative milestone in bolstering Europe-Africa trade flows.
The Maltese branch was established by Access Bank UK Limited, the subsidiary of Access Bank Plc, which is also the subsidiary of Access Holdings Plc, which is listed on the Nigerian Exchange (NGX) Limited.
By Modupe Gbadeyanka
To strengthen Europe-Africa trade ties, Access Bank has opened a new branch in Malta. It will focus on international trade finance, employing approximately 30 people in its initial phase, with plans for controlled expansion over time.
It was learned that this Maltese branch was established by Access Bank UK Limited, the subsidiary of Access Bank Plc, which is also the subsidiary of Access Holdings Plc, which is listed on the Nigerian Exchange (NGX) Limited.
Access Bank Malta Limited commenced operations after obtaining a banking licence from the European Central Bank (ECB) and the Malta Financial Services Authority (MFSA).
Access Bank said the licence marks a transformative milestone in bolstering Europe-Africa trade flows.
Malta, a renowned international financial centre, and a gateway between the two continents, is strategically positioned to play a pivotal role in advancing commerce and fostering economic partnerships.
This strategic expansion into Malta enables The Access Bank UK Limited to leverage growing trade opportunities between Europe and Africa.
It underscores the organisation’s commitment to driving global trade, financial integration, and supporting businesses across these regions.
“By establishing operations in Malta, we will gain a foothold in a market that bridges European and North African economies, moving us one step closer to our goal of becoming Africa’s Gateway to the World.
“It further enhances our bank’s capacity to support clients with innovative solutions tailored to cross-border trade and investment opportunities,” the chief executive of Access Bank, Mr Roosevelt Ogbonna, stated.
“Europe has emerged as Africa’s leading trading partner, driven by initiatives such as the Economic Partnership Agreements between the EU and African regions and the African Continental Free Trade Area (AfCFTA).
“With Europe-Africa economic relations entering a new phase, The Access Bank Malta Limited is ideally positioned to deepen trade and meet the financing and banking needs of our clients in these expanding markets,” the chief executive of Access Bank UK, Mr Jamie Simmonds, commented.
Also speaking, the chief executive of Access Bank Malta, Renald Theuma, said, “Malta is uniquely positioned as a bridge between Europe and Africa, making it an ideal location for our subsidiary. This move allows The Access Bank Malta Limited to engage more closely with customers in Europe and deliver tailored financial solutions that drive growth and connectivity across both continents.”
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