Fitch Ratings has affirmed Ecobank Transnational Incorporated's (ETI) Long-Term Issuer Default Rating (IDR) at 'B-' and Viability Rating (VR) at 'b-' and removed these ratings from Rating Watch Negative (RWN).

It also kept the Outlook of the Pan-African Bank as stable.

According to the UK-based firm, ETI's Government Support Rating of 'no support' is unaffected.

The affirmation, it said, reflects ETI's continuing compliance with group minimum regulatory capital requirements following the devaluation of the Nigerian naira and “Fitch's expectation that, although capital buffers remain thin, would continue to remain compliant in the event of a further material devaluation of the naira”.

The affirmation also reflects Fitch's view of receding refinancing risks with respect of large upcoming bank holding company (BHC) principal repayments in 2024 and 2025, adding, “This considers ETI's maintained capital compliance, after having recently secured significant funding and our expectation that further funding will be secured imminently”.

High exposure to volatile sovereigns 

Fitch said ETI’s operating conditions are negatively influenced by rising sovereign debt sustainability risks across sub-Saharan Africa (SSA).

Nigeria (B-/Stable) and Ghana (RD), which are two of the group's largest markets (end-2022: 32% of total assets), have both been downgraded in recent years, with Ghana defaulting on local- and foreign-currency (FC) debt in 1Q23.

Strong Pan-African franchise

It stated that ETI had banking subsidiaries spanning 33 Sub-Saharan Africa countries and assets of $26.6 billion at end quarter 3, 2023, making it one of the largest banking groups on the continent outside of South Africa.

Again, its strong revenue diversification is supported by a broad geographical footprint and high non-interest income.

Healthy operating profitability

Fitch said the group’s operating profit improved significantly to 4.6% of RWAs in nine months of 2023, primarily due to a wider net interest margin benefitting from rising interest rates.

Fitch however expects FC translation losses to remain large in 2024 due to naira weakness.