Fitch Ratings has affirmed Togo-based Ecobank Transnational Incorporated's (ETI / the holding company of the pan-African Ecobank group), Long-term Issuer Default Rating (IDR) at 'B-' with a Stable Outlook, Short-term IDR at 'B', Viability Rating (VR) at 'b-', Support Rating at '5' and Support Rating Floor at 'No Floor'.
The affirmation of ETI's IDRs with a Stable Outlook and VR reflect the banking group's (i.e. the consolidation of ETI and its subsidiaries) improving financial performance due to its growing footprint across Africa. The ratings continue to reflect ETI's weak capital position, despite recently raised equity and its high risk profile reflecting a wide network across several low rated sovereigns. ETI's IDRs are based on its standalone risk profile and are therefore aligned with its VR.
ETI raised USD350m of new equity in 2012 leading to an improving Fitch Core Capital ratio (end-H113: 12.2%). Nonetheless, Fitch believes capital to be weak given its high double leverage (end-H113: 124%), modest capitalisation at some subsidiaries and high sensitivity to sovereign risk. ETI's high double leverage is the result of past acquisitions and is unlikely to improve until 2014 if/when Nedbank exercises its option on a USD285m convertible loan and acquires additional shares to take a 20% stake in the holding company.
ETI has a solid franchise and is one of the largest pan-African banking groups with fully fledged banking subsidiaries in 32 countries in Africa. These countries are either not rated or rated between 'B' and 'BB-' highlighting the risks in lending to emerging industries and sectors. ETI's largest subsidiary is Ecobank Nigeria (c. 40% of group assets) which means that the group's prospects are to a large extent linked to that of the performance of its Nigerian operations, which are evolving.
The affirmation of ETI's IDRs with a Stable Outlook and VR reflect the banking group's (i.e. the consolidation of ETI and its subsidiaries) improving financial performance due to its growing footprint across Africa. The ratings continue to reflect ETI's weak capital position, despite recently raised equity and its high risk profile reflecting a wide network across several low rated sovereigns. ETI's IDRs are based on its standalone risk profile and are therefore aligned with its VR.
ETI raised USD350m of new equity in 2012 leading to an improving Fitch Core Capital ratio (end-H113: 12.2%). Nonetheless, Fitch believes capital to be weak given its high double leverage (end-H113: 124%), modest capitalisation at some subsidiaries and high sensitivity to sovereign risk. ETI's high double leverage is the result of past acquisitions and is unlikely to improve until 2014 if/when Nedbank exercises its option on a USD285m convertible loan and acquires additional shares to take a 20% stake in the holding company.
ETI has a solid franchise and is one of the largest pan-African banking groups with fully fledged banking subsidiaries in 32 countries in Africa. These countries are either not rated or rated between 'B' and 'BB-' highlighting the risks in lending to emerging industries and sectors. ETI's largest subsidiary is Ecobank Nigeria (c. 40% of group assets) which means that the group's prospects are to a large extent linked to that of the performance of its Nigerian operations, which are evolving.
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