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Fitch Ratings
has downgraded Guaranty Trust Bank (Ghana) Limited's Long-Term Issuer Default
Rating (IDR) to 'B-' from 'B' and Viability Rating (VR) to 'b-' from 'b'. The
Outlook on the Long-Term IDR is Stable.
The rating
actions follow Fitch's downgrade of Ghana's Long-Term IDRs to 'B-' from 'B' on
14 January 2022 (see Fitch
Downgrades Ghana to 'B-'; Outlook Negative).
Fitch has
withdrawn GTB Ghana's Support Rating as it is no longer relevant to the
agency's coverage following the publication of its updated Bank Rating Criteria
on 12 November 2021. In line with the updated criteria, we have assigned a
Shareholder Support Rating (SSR) of 'b-'.
Key Rating
Drivers
IDRs and SSR
GTB Ghana's
Long-Term IDR is now driven by our assessment of the likelihood of
extraordinary support from its Nigeria-based parent, Guaranty
Trust Bank Limited (GTB Limited; B/Stable), as expressed by its SSR of
'b-'. The Long-Term IDR and SSR are at the same level as Ghana's Country
Ceiling of 'B-'. The Stable Outlook on GTB Ghana's Long-Term IDR reflects that
on GTB Limited's Long-Term IDR.
Fitch's view
of support considers GTB Limited's high propensity to provide support, given
GTB Ghana's importance to the group's pan-African strategy and its substantial
contribution to group net income (13% in 9M21). It also considers the 98%
ownership, common branding, a strong performance record and high level of
management and operational integration between GTB Ghana and the wider group.
However, GTB
Limited's ability to provide support is conditioned by its standalone
creditworthiness, as captured by its Long-Term IDR. We also consider there to
be a risk of regulatory restrictions in Nigeria, particularly concerning
foreign-currency flows out of the country, which may constrain GTB Limited's
ability to provide timely and sufficient support.
VR
The downgrade
of GTB Ghana's VR follows the downgrade of Ghana's Long-Term IDRs as the bank
does not meet Fitch's criteria to be rated above the sovereign on a standalone
basis. Fitch considers that GTB Ghana is unlikely to remain solvent in a
sovereign default scenario, due to the concentration of its operations within
Ghana, reliance on sovereign-derived income and particularly high exposure to
the sovereign relative to capital, primarily through local-currency government
securities (equivalent to an estimated 169% of total equity at end-9M21).
Rating Sensitivities
Factors that
could, individually or collectively, lead to negative rating action/downgrade:
Factors that
could, individually or collectively, lead to positive rating action/upgrade:
VR Adjustments
The Earnings
and Profitability Score of 'b-' has been assigned below the 'bb' category
implied score due to the following adjustment reason: revenue diversification
(negative).
The
Capitalisation and Leverage Score of 'b-' has been assigned below the 'bb'
category implied score due to the following adjustment reason: concentrations
(negative).
The Funding
and Liquidity Score of 'b' has been assigned below the 'bb' category implied score
due to the following adjustment reasons: historical and future metrics;
liquidity coverage (negative).
Best/Worst
Case Rating Scenario
International
scale credit ratings of Financial Institutions and Covered Bond issuers have a
best-case rating upgrade scenario (defined as the 99th percentile of rating
transitions, measured in a positive direction) of three notches over a
three-year rating horizon; and a worst-case rating downgrade scenario (defined
as the 99th percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and worst-case
scenario credit ratings for all rating categories ranges from 'AAA' to 'D'.
Best- and worst-case scenario credit ratings are based on historical performance.
Public
Ratings With Credit Linkage To Other Ratings
GTB Ghana's
Long-Term IDR is driven by GTB Limited's Long-Term IDR.
ESG
Considerations
Unless
otherwise disclosed in this section, the highest level of ESG credit relevance
is a score of '3'. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity, either due to their nature or the way in
which they are being managed by the entity.
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