Ratings agency, Fitch, has assigned Guaranty Trust Bank Ghana a Long-Term Issuer Default Rating of 'B' with a stable outlook.

The ratings consider the concentration of its operations in the challenging operating environment, its small market shares, high credit concentrations and ambitious growth strategy.

However, these considerations are balanced against the bank’s healthy asset quality and strong profitability, capitalisation and liquidity coverage.

Fitch said GT Bank Ghana has small market shares of assets and customer deposits (both 3% at end-2020) but its franchise benefits from being a subsidiary of Guaranty Trust Bank PLC (GTB PLC), Nigeria's fifth-largest banking group.

“Market shares are expected to increase moderately over the next three years as GTB Ghana grows faster than the sector average with the objective of becoming a systemically important bank. However, this target is challenging due to the bank's current market position and Ghana's highly competitive banking sector”, it continued.

It further said “single-borrower credit concentration is high, with the bank's 20-largest loans representing 83% of gross loans at end-2020.”

However, these 20 largest exposures represented just 87% of total equity, reflecting GT Bank Ghana's large capital base and a low share of loans in total assets.

The ratings agency said “our risk appetite assessment also considers strong loan growth in recent years, driven by corporate lending that we expect to continue and may lead to pressure on asset quality in the event of a relaxation of underwriting standards.”

Bad loans

Fitch said GT Bank Ghana's impaired loans ratio is significantly lower than the banking sector average of 15.3% at the end of February 2021.

The percentage of gross loans benefitting from restructured terms as a result of the covid-19 pandemic declined to 1% at the end of the first quarter of 2021, from 14% at the end of 2020 as a result of a few large exposures.

“Our asset-quality assessment also considers the bank's small loan book (27% of total assets at end of quarter one) and large holdings of Ghanaian government securities (B/Stable; 51% of total assets at end-2020), it added.