Moody’s Affirms Ecobank Ratings, Maintains Negative Outlook
Moody’s Ratings has affirmed Ecobank Transnational Incorporated’s (ETI) B3 long-term issuer ratings and maintains a negative outlook on the pan African lender. According to the rating note, Moody’s explained that these include Not Prime short-term issuer ratings, the b2 Baseline Credit Assessment (BCA) and the b1 Adjusted BCA.
“At the same time, we have maintained the negative outlook on the group’s long-term issuer ratings,” the rating note added. ETI is a bank holding company, with banking subsidiaries operating across 38 countries, including 35 African countries, and total assets of $27 billion as of March 2024.
The outlook on the long-term issuer ratings was changed to negative from stable in February 2023 in order to reflect the material deterioration in the operating environments of Ghana and Nigeria, along with the modest liquidity of the holding company, Moody’s explained.
The global ratings agency said the decision to maintain a negative outlook now reflects the risk posed to ETI by both the holding company’s modest foreign currency liquidity and the pressured capitalisation of its Nigerian subsidiary.
Moody explained that the risks posed by ETI’s modest foreign currency liquidity position arise from its sizeable debt maturities during 2024–26. The loan includes a twelve-month $350 million bridge-to-bond loan signed in March 2024, with a six-month extension option at the lenders’ discretion.
Additionally, the negative outlook also captures the risk associated with ETI’s rising double leverage ratio, which measures the liquidity risk taken on by the holding company, as a result of its borrowing in order to invest in the equity of its subsidiaries, Moody’s added.
The rating note stated that ETI’s double leverage ratio increased to 173% in 2023, from an already high 165% in 2022 and 153% in financial year 2021. Moody’s said these risks are, however, partly moderated by the gradual increase in dividends paid by ETI’s subsidiaries and up-streamed to the holding company.
As well, it was noted that the group recently refinanced part of ETI’s $500 million Eurobond, which was fully repaid in April 2024 with long-term funding from development finance institutions (DFIs). According to the rating note, the balance of the Eurobond was refinanced with the bridge-to-bond loan.
Moody’s noted that ETI maintains strong relationships with DFIs, which have supported its funding needs in recent years. It explained that the negative outlook also reflects the risk posed to ETI by the pressured capitalisation of its Nigerian subsidiary, Ecobank Nigeria Limited, following the material devaluation in the local currency since June 2023.
Adding that, Ecobank Nigeria Limited has yet to release its financial statements for the year ending December 2023. “We understand, however, that a number of initiatives and actions are being taken to strengthen the capitalisation of the group’s Nigerian subsidiary”.
Meanwhile, Moody’s explained further that there is limited upward pressure on the ratings given the negative outlook. It added that the ratings could be stabilised if ETI refinances the bulk of its short-term bridge loan with longer-term funding and its banking subsidiaries further increase dividend payments upstream to the holding company.
According to the rating note, the negative outlook can also be reversed if Ecobank Nigeria Limited demonstrates strengthening and continued regulatory compliance in its capital position. #Moody’s Affirms Ecobank Ratings, Maintains Negative Outlook NEM Insurance Shareholders Approve N3.01bn Dividend for 2023 Financial Year
