Rating agency, Fitch Ratings, has affirmed Guaranty Trust Bank and UBA Ghana’s credit ratings at ‘B-‘ with a Stable Outlook.

Fitch also affirmed their Shareholder Support Ratings at ‘b-‘ and Viability Ratings (VR) at ‘ccc’.  

This is coming after it downgraded the two banks to junk status in August. There is more in this report.

The rating actions follow the downgrade of Ghana’s credit rating to junk status on September 23.

Fitch said the affirmation of Viability Ratings of GT Bank Ghana and UBA Ghana at ‘ccc’ reflects its view that failure is a real possibility in the context of a likely restructuring of Ghana’s local- and foreign-currency debt, but it’s not a probable outcome as potential losses are expected to be tolerable due to the banks’ large capital buffers. 

“The affirmation of the VRs at ‘ccc’ reflects our view that, as per Fitch’s definition, failure is a real possibility in the context of a likely restructuring of Ghana’s local- and foreign-currency debt but not a probable outcome as potential losses are expected to be tolerable due to the banks’ large capital buffers”.

“A restructuring involving material losses being imposed on sovereign creditors would have a significant effect on the banks’ solvency given their large holdings of sovereign fixed-income securities relative to their common equity Tier 1 (CET1) capital (GTB Ghana: 189%; UBA Ghana: 325% at end-1H22)”, it added.

However, It expects that losses imposed on creditors as part of a restructuring of sovereign debt would not be of a magnitude, so as to undermine the solvency of the banking system.

GT Bank Ghana and UBA Ghana have stronger capitalisation than the aggregated banking system and therefore Fitch’s base case is that losses will be tolerable.

However, the scale of such losses is uncertain and therefore failure remains a real possibility.