Banking Consultant and former Managing Director of AmalBank, now Bank of Africa, Menson Torkonoo is expressing worry about the banking industry’s high exposure to government business and securities.

Ratings agency, Fitch, reviewed its outlook for two Nigerian banks operating in Ghana to negative, from stable.

Its argument was that the two banks were too much exposed to the country’s rising debt, a situation that could affect their capitalisation, assets quality and profitability.

Speaking to Joy Business, Mr. Torkonoo said the situation is not pleasant for the banking industry.

This is a very serious issue even though I don’t know the quantum of the downgrade [review], but once it is negative, then it’s a very serious matter. It is going to affect their capitalisation, it’s going to affect also their profitability because these are things when it happens, the Bank of Ghana would want you to write them off; and if you write them off, it will affect your capital and at the same time your profitability”

When Joy Business asked him about whether the country should be worried of any systemic risk in the banking industry because these banks may be exposed to some other banks due to inter-bank lending, he responded in the affirmative.

He said “you are right because it is going to affect us. Apart from the effect on inter-bank lending, the other side of it is that there is a possibility that there are other banks which are in the same category but it has not been picked up by the Central Bank…, this is the danger”.

Fitch revises outlook of 2 Nigerian banks operating in Ghana to negative but affirms IDR at ‘B’

International Ratings agency, Fitch, has revised the outlook of two Nigerian banks operating in Ghana to negative, from stable but affirmed the Long-Term International Depository Receipt (IDRs) at ‘B’ ratings.

The two Nigerian banks [names withheld] were the 1st and 3rd to begin operations in Ghana about 15 years ago.

According to Fitch, the rating actions follow the revision of the outlook of Ghana’s Long-Term IDR to negative, from stable in June 2021.

This is probably because the two banks are exposed so much to the country’s rising debt which hit ¢332.4 billion in May 2021.