Ecobank cautious on Ghana strategy as it counts cost of proposed debt-swap

By David Whitehouse
Posted on Tuesday, 13 December 2022 06:00

Ecobank in Côte d'Ivoire (AP Photo/Emanuel Ekra)

Ghana’s proposed domestic debt restructuring leaves Ecobank, the country’s largest bank by assets, cautious over its corporate finance strategy in the country.

The debt restructuring “will affect our risk-weighted assets,” the bank’s head of corporate finance Meinna Gwet tells The Africa Report. “We will have to be very cautious about our strategy in the country” in 2023.

Domestic holders of Ghana’s debt were invited on 5 December to exchange $10.5bn in local bonds for new ones. The new bonds won’t pay any interest until 2024, when there will be the first payment of 5%, increasing to 10% in 2025. Finance minister Kenneth Ofori-Atta says the restructuring is an “essential element” of the economic reform programme for which he is seeking backing from the IMF.

Fitch Ratings in August downgraded Ecobank Ghana’s long-term Issuer default rating to ‘CCC+ from ‘B-‘ due to doubts that financial support for Ecobank Ghana from Ecobank Group’s holding company, Togo-based Ecobank Transnational Incorporated (ETI) is available. Such support, if needed, is possible, but “cannot be relied on,” Fitch said.

The four largest shareholders in ETI are South Africa’s Nedbank, Qatar National Bank, Arise BV and Public Investment Corporation of South Africa. Together they have a 69% stake. ETI’s ability to provide new finance for Ecobank Ghana is “constrained by the group’s own creditworthiness” and the extent of the Ghanaian exposure. Ecobank Ghana made up 11% of the group’s consolidated assets at the end of the first half, Fitch said.

  • The bank is in the process of calculating the financial impact of the restructuring, Gwet says.
  • Fitch no longer provides coverage of Ecobank for “commercial reasons”.

As a leading bank in Ghana, Ecobank “has to closely partner with the government,” Gwet says. It’s “very possible” that the restructuring will be accepted as proposed. “Our intention is not to be contrarian to a movement that might be irreversible. We will negotiate as much as possible with the government.”

  • There are no plans for Ecobank to reduce its presence in Ghana. “We are the top bank in Ghana and intend to stay so.”
  • Banking-sector consolidation in Ghana is a possible long-term consequence of the restructuring, she adds.

Gwet is confident that Ghana’s banking sector will emerge stronger from the restructuring. “The most resilient banks can come through this.”

She is also confident that IMF support will help the country recover in the medium term.

Ecobank growth targets

ETI is listed on the stock exchanges of Nigeria and Ghana, as well as the Bourse Régionale des Valeurs Mobilières in Abidjan. Ecobank Group operates in 33 African countries.

Sectors which offer the bank growth prospects in corporate finance in coming years include infrastructure, energy and manufacturing, Gwet says.

Promising markets in West Africa include Senegal, Côte d’Ivoire, Togo and Benin, she adds.

  • Prospects in oil and gas production in Senegal open opportunities in infrastructure financing and give the country the chance to become more self-sufficient, Gwet says.
  • Preliminary discussions with the government have taken place and will “deepen” in 2023.
  • Further afield, the bank also sees scope for expansion in Kenya and DRC, she concludes.

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