Rated Entity Rating class Rating scale Rating Outlook Ecobank Ghana PLC Long Term issuer National A+(GH) Stable Outlook
Short Term issuer National A1(GH)

Rating Rationale
The ratings on Ecobank Ghana PLC (“Ecobank Ghana”) reflect a strong business profile supported by leading market shares, stable funding sources and good levels of liquidity. The ratings also factor in improving capitalisation and improving asset quality risk.
The bank’s competitive position is strong, with a cost of funds of less than 2%, benefiting from being part of the broader Ecobank Transnational Incorporated’s (“ETI”) group, which owns 68.93% of the bank’s shares. ETI is a pan-African conglomerate with banking operations spanning over 33 countries. Ecobank Ghana’s approximate market share for deposits in FY21 stood at 13.2% (FY20: 13.1%), while the gross advances market share stood at 11.0% (FY20: 10.4%), supporting its solid domestic footprint. The bank’s revenue is stable, supported by a healthy internal capital generation of 29% in FY21(FY20:35%). Total operating revenue grew from GHC985m in June 2021, to GHC1,186m in June 2022. The growth was mainly driven by net interest income and general banking fees. The cost-to-income ratio stood at 46% in June 2022,
in comparison to 39.6% in June 2021.
Ecobank Ghana is adequately capitalised, with a GCR capital ratio of 20.6% at 31 December 2021 (FY20:18.6%), while also reporting a CAR above the D-SIB minimum regulatory requirement of 15%. However, the bank’s CAR ratio dipped to 16% at June 2022, largely due to the single large dividend paid once a year, albeit it only will reflect in the third quarter of 2022. The GCR capital ratio is expected to be around 20% by the end of the year.

Although the bank’s asset quality has come under pressure due to the COVID-19 pandemic, the NPL ratio improved from 8% at June 2021 to 5% at June 2022. However, 20% of the NPLs have been restructured as certain sectors were hit hard by the pandemic, namely construction, real estate, and hospitality sectors. The bank’s gross loan and advances increased from GHC5.3billion in FY20 to GHC6.2billion in FY21 with loan loss reserves of GHC531.3million. We expect the cost of risk to remain below 10% within the short to medium-term. Concomitantly, the bank’s credit losses have registered at moderate levels of below 5% historically, and we expect them to remain the same in the next 12-18 months. Foreign currency (FCY) loans accounted for 31.9% of gross loans and advances in FY22 (FY20: 34.6%), with most of the facilities extended to the manufacturing sector, constituting 19.2% of the bank’s loan book. We also note the rising risk of the Ghanaian sovereign. In the unanticipated event of a sovereign default and haircut of local currency government debt, there could be significant capital erosion across the banking sector. Positively, sovereign debt accounts for 12.3% of total assets for Ecobank Ghana.

Funding sources are relatively stable, supported by the bank’s strong retail footprint. The GCR long term funding ratio and stable funding ratios were 112% (FY21: 108%) and 88% (FY21: 84%) at 30 June 2022 respectively. A large portion of the funding consists of customer deposits as the core deposit ratio stood at 91% at 31 December 2021. The bank’s liquidity is adequate as the bank has a high liquid asset coverage of wholesale funding of 541.2% at June 2022. The GCR liquid assets over deposits stood at 73% in June 2022.
The standalone ratings are effectively capped by the credit profile of the group, as reflected in the negative adjustment to the standalone risk score.

Outlook Statement
The outlook is stable due to decent liquidity and its adequate capitalisation. Despite the turbulent operating environment, it is expected that the entity will remain resilient even if the asset quality deteriorates.

Rating Triggers
We could revise the ratings upwards if Ecobank Ghana raises and maintains a higher GCR capital ratio (above 23%) over the outlook horizon, presuming the group creditworthiness also improves. We could lower the ratings if: 1) credit losses are at levels above 5% in the outlook horizon, including unexpected sovereign debt haircuts; 2) asset quality deteriorates below industry averages; 3) the company records internal capital generation at levels lower or in line with risk weighted asset growth; 4) ETI’s financial profile deteriorates; or 5) liquidity ratio falls within 100bps of the regulatory minimum.

Analytical Contacts
Primary analyst Dimakatso Mothibedi Associate Analyst: Financial Institutions
Johannesburg, ZA Dimakatsom@GCRratings.com +27 11 784 1771
Secondary analyst Matthew Pirnie Group Head of Ratings
Johannesburg, ZA MatthewP@GCRratings.com +27 11 784 1771
Committee chair Vinay Nagar Sector Head: Financial Institutions
Johannesburg, ZA Vinay@GCRratings.com +27 11 784 1771
Related Criteria and Research
Criteria for the GCR Ratings Framework, January 2022
Criteria for Rating Financial Institutions, May 2019
GCR Ratings Scale, Symbols & Definitions, May 2022
GCR Country Risk Scores, August 2022
GCR Financial Institutions Sector Risk Score, June 2022

Ratings History
Ecobank Ghana PLC
Rating class Review Rating scale Rating Outlook Date
Long- and short-term issuer Initial National AA-(GH)/A1+(GH) Stable Outlook December 2013
Last National A+(GH)/A1(GH) Positive Outlook June 2021

Risk Score Summary
Rating Components & Factors Risk scores
Operating environment 6.50
Country risk score 3.50
Sector risk score 3.00
Business profile 2.0
Competitive position 2.0
Management and governance 0.00
Financial profile 0.75
Capital and Leverage (0.25)
Risk 0.00
Funding and Liquidity 1.00
Comparative profile (1.25)
Group support (1.25)
Government support 0.00
Peer analysis 0.00
Total Score 8.00

Glossary
Covenant A provision that is indicative of performance. Covenants are either positive or negative. Positive covenants are activities that the borrower commits to, typically in its normal course of business. Negative covenants are certain limits and restrictions on the borrowers’ activities.
Debt An obligation to repay a sum of money. More specifically, it is funds passed from a creditor to a debtor in exchange for interest and a commitment to repay the principal in full on a specified date or over a specified period.

Rating Horizon The rating outlook period.
Rating Watch See GCR Rating Scales, Symbols and Definitions.
Refinancing The issue of new debt to replace maturing debt. New debt may be provided by existing or new lenders, with a new set of terms in place.
Repayment Payment made to honour obligations regarding a credit agreement in the following credited order: 3.) Satisfy the due or unpaid interest charges; 4.) Satisfy the due or unpaid fees or charges; and 5.) To reduce the amount of the principal debt. Rights Issue One of the ways that a company can raise additional funds is to issue new shares. These must be first offered to current shareholders and a rights issue allows a shareholder to buy shares in proportion to the number already held. Short Term Current; ordinarily less than one year.

Working Capital Working capital usually refers to the resources that a company uses to finance day-to-day operations. Changes in working capital are assessed to explain movements in debt and cash balances.
Interest Cover Interest cover is a measure of a company’s interest payments relative to its profits. It is calculated by dividing a company’s EBITDA by its interest payments for a given period. Issuer Ratings See GCR Rating Scales, Symbols and Definitions.
Leverage In corporate analysis, leverage (or gearing) refers to the extent to which a company is funded by debt.
Liquidity The speed at which assets can be converted to cash. It can also refer to the ability of a company to service its debt obligations due to the presence of liquid assets such as cash and its equivalents. Market liquidity refers to the ease with which a security can be bought or sold quickly and in large volumes without substantially affecting the market price. Maturity The length of time between the issue of a bond or other security and the date on which it becomes payable in full.

SALIENT POINTS OF ACCORDED RATING

GCR affirms that a.) no part of the rating process was influenced by any other business activities of the credit rating agency; b.) the ratings were based solely on the merits of the rated entity, security or financial instrument being rated; and c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument.
The credit rating has been disclosed to the rated entity. The rating was solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the rating. The rated entity participated in the rating process via virtual management meetings, and other written correspondence.
The information received from Ecobank Ghana Limited and other reliable third parties to accord the credit ratings included:
• The audited financial results to 31 December 2021
• Unaudited interim results to 30 June 2022
• Four years of comparative audited numbers
• Other related documents

CREDIT RATINGS ISSUED BY GCR ARE GCR’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY GCR (COLLECTIVELY, PUBLICATIONS) MAY INCLUDE SUCH CURRENT OPINIONS. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE. SEE APPLICABLE GCR RATING SCALES, SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY GCR’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON- CREDIT ASSESSMENTS (“ASSESSMENTS”) AND OTHER OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. GCR’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND GCR’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. GCR’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE. GCR’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE GCR’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT GCR’S PRIOR WRITTEN CONSENT.
GCR’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.
All information contained herein is obtained by GCR from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. GCR adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources
GCR considers to be reliable including, when appropriate, independent third-party sources. However, GCR is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.
To the extent permitted by law, GCR, its affiliates and its and their directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if GCR or any of its
directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses.