Ratings agency, Fitch, has affirmed Guaranty Trust Bank (Ghana) Limited's Long-Term Issuer Default Rating (IDR) at 'B-' with a Stable Outlook and Viability Rating (VR) at 'b-'. 

It said GT Bank Ghana's Long-Term IDR is driven by potential support from its Nigeria-based parent Guaranty Trust Bank Limited (GTB Limited; B/Stable), as expressed by its Shareholder Support Rating (SSR) of 'b-'.

The Stable Outlook also reflects that on GT Bank Limited's Long-Term IDR. GT Bank Ghana's Long-Term IDR is at the same level as Ghana's Country Ceiling of 'B-', which captures Fitch's view of transfer and convertibility risk within Ghana.

Shareholder Support

Fitch considers GT Bank Limited to have a high propensity to provide support given GT Bank Ghana's importance to the group's pan-African strategy and its substantial contribution to the group net income (13% in 2021).

It also considers the 98% ownership, common branding, strong performance record and high level of management and operational integration between GT Bank Ghana and the wider group.

However, GT Bank Limited's ability to provide support is limited by its creditworthiness, as expressed by its Long-Term IDR.

Sovereign Constrains VR 

Fitch said GT Bank Ghana is unlikely to remain solvent in a sovereign default scenario due to the concentration of its operations within Ghana, its reliance on sovereign-derived income, and high exposure to the sovereign (36% of total assets at end-first quarter of 2022) relative to capital (174% of the CET1 common equity Tier 1 (CET1) capital at end-1Q22).

It therefore does not meet Fitch's criteria to be rated above the sovereign on a standalone basis.

Moderate Franchise

GT Bank Ghana represented just 3% of Ghanaian banking system assets at end-2021, but its franchise benefits from being a subsidiary of GT Bank.

Fitch said market shares will however increase moderately over the medium term as GT Bank Ghana pursues aggressive growth.

Aggressive Loan Growth:

Fitch said extremely strong loan growth in 2020 and 2021 (85% and 56%, respectively) was largely driven by increased exposure to existing customers, which has heightened single-borrower credit concentration.

However, underwriting standards remained reasonable, with new lending largely being collateralised by sovereign fixed income securities.

Also, strong loan growth will continue in 2022 and 2023 and may lead to loan book seasoning risks.

Healthy Loan Quality: 

The ratings agency said GT Bank Ghana's impaired loans ratio (2.4% at the end of first quarter of 2022) is significantly lower than the banking sector average (14.4% at the end of the second month of 2022).

However, Fitch’s asset quality assessment reflects large holdings of mainly local-currency Ghanaian government securities.

Strong Profitability

On profitability, Fitch said strong earnings are underpinned by Ghana's high interest rate environment, which supports a wide net interest margin, and strong non-interest income in the form of fees and trading income.

It added that earnings are highly reliant on interest income from government securities (49% of total interest income in 2021).

However, this reliance has decreased in recent years (from 69% in 2018) due to accelerated lending growth.