Fitch Affirms Ecobank Transnational at ‘B-’; Outlook Stable Amid Sub-Saharan Africa Risks

March 14, 2025 – Fitch Ratings has maintained Ecobank Transnational Incorporated’s (ETI) Long-Term Issuer Default Rating (IDR) at ‘B-’ with a Stable Outlook and a Viability Rating (VR) of ‘b-’. This decision reflects the bank’s solid positioning in Sub-Saharan Africa, despite facing substantial risks from currency fluctuations and sovereign debt exposure in its key markets.

Rating Drivers and Key Insights

Standalone Creditworthiness Amid Double Leverage Concerns:
ETI’s ratings are primarily driven by its standalone creditworthiness. The bank’s VR is downgraded from the group’s VR of ‘b’ due to high common equity double leverage, currently at 179% as of Q3 2024. This indicates a heavier reliance on debt for financing relative to equity, which can impact financial flexibility.

Pan-African Reach Supports Revenue Diversification:
With operations in 33 countries across Sub-Saharan Africa, ETI boasts a diversified revenue base. Its total assets amounted to USD 26.6 billion at the end of Q3 2024, and non-interest income represented 44% of its operating revenue in the first nine months of 2024. However, risks remain due to exposure to sovereign debt in Nigeria and Ghana, two of its largest markets, which have recently faced downgrades.

FX Exposure Hits Capital Ratios:
ETI’s reporting currency in US dollars exposes the bank to the volatility of regional currencies, leading to large foreign-currency translation losses, especially in Nigeria and Ghana. These losses have impacted capital buffers, with a comprehensive loss of USD 265 million recorded for 2023 and the first nine months of 2024.

Asset Quality Under Pressure:
ETI’s asset quality is constrained by its holdings of sovereign debt in key African markets. By the end of Q3 2024, impaired loans increased to 6.6% of total loans, up from 5.4% at the end of 2023, with coverage at 60%. Fitch notes that these sovereign risks continue to weigh on the bank’s overall credit profile.

Profitability Remains Stable, Capital Buffers Modest:
Despite the challenges, ETI has posted strong operating profitability, with a return on risk-weighted assets (RWAs) of 4.9% in 9M24, benefiting from higher interest rates and lower impairment charges. However, the bank’s capital buffers remain modest, with its CET1 ratio at 9.7%, slightly above the regulatory minimum of 8.5%. Fitch expects this to improve in the near future.

Debt Repayments Manageable, but Risks Persist:
ETI has successfully reduced refinancing risks with a USD 400 million senior unsecured Eurobond issued in October 2024. However, risks could emerge if the Nigerian subsidiary faces acceleration on its Eurobond maturing in February 2026 due to capital compliance issues.

Outlook and Potential Rating Adjustments

Negative Rating Triggers:
• Breach of capital requirements due to large foreign-currency translation losses.
• A rise in double leverage or increased liquidity risks could widen the rating gap between the group and the BHC.
• Further downgrades of sovereigns in key markets, such as Nigeria and Ghana, could negatively affect ratings.

Positive Rating Triggers:
• A sustained reduction in common equity double leverage below 120% could lead to a rating upgrade.
• Improvements in the operating environment, a reduction in currency risks, and stronger capital buffers would also support a potential upgrade.

Government Support Rating:

Fitch has assigned a ‘no support’ Government Support Rating (GSR) to ETI, indicating that support from any sovereign authority is unlikely due to the bank’s limited systemic importance and its reliance on wholesale funding.

ESG Considerations:

Fitch’s ESG Relevance Scores suggest that environmental, social, and governance factors have minimal credit impact, with a neutral score of ‘3’. These issues are not material to the rating decision but are monitored as part of the analysis.

For more details, visit Fitch Ratings’ official platform.