Fitch revises outlook of 2 Nigerian banks operating in Ghana to negative

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.

The revision of the outlooks on the banks’ IDRs reflects Fitch’s view that a sovereign downgrade would likely result in a downgrade of the issuers’ Long-Term IDRs”, it said.

Fitch said the revision of the outlooks of the two banks IDRs reflect its view that a sovereign downgrade would likely result in a downgrade of the banks Long-Term IDRs.

A sovereign downgrade would result in a downgrade of the banks’ Long-Term IDRs and Viability Ratings (VR), given that the banks do not meet Fitch’s criteria to be rated above the sovereign.”

Also, “stronger-than-expected loan or balance-sheet growth or material deterioration in asset quality that exerts significant downward pressure on capitalisation and leverage may result in a VR downgrade if not compensated by new equity injections. This could be indicated by a sustained decline in the tangible common equity/tangible assets ratio to around 12%.

It added that a sovereign downgrade may have a negative impact on the banks’ asset quality, earnings and capitalisation.

Meanwhile, Fitch has revised the outlook of Access Bank Plc to stable, from negative.

According to the international ratings agency, its decision reflects the view that risks to Access Bank’s credit profile have retreated since the onset of the Covid-19 crisis, adding, this is captured in the bank’s resilient financial metrics.