Action follows downgrade of Ghana's sovereign rating to Caa1, stable outlook.
Moody's Investors Service ("Moody's") has today downgraded GCB Bank PLC's (GCB Bank or GCB) global long-term deposit ratings to Caa1 from B3 and lowered its Baseline Credit Assessment (BCA) and Adjusted BCA to caa1 from b3. The outlook on the bank's long-term deposit ratings has been changed to stable, from negative.
Today's rating action follows the weakening of the Ghanaian government's credit profile, as captured by Moody's downgrade of the sovereign rating to Caa1 from B3, with a stable outlook, on 04 February 2022. For further information, please see the sovereign press release: https://www.moodys.com/research/--PR_461698.
A full list of the bank's ratings affected by today's rating action is provided below.
RATINGS RATIONALE
Today's downgrade of GCB's deposit ratings to Caa1 reflects primarily the sizable holding of sovereign debt securities, at around 3.8 times its shareholders' equity and 55% of total assets as of September 2021, which links GCB's creditworthiness to that of the government.
The action also reflects, to a much lesser degree, the challenges that GCB faces given the fragile operating environment, which leads to asset quality risks as shown by the increase in its nonperforming loans to 19.9% as of September 2021, from 12.7% as of year-end 2020. However, Moody's also notes the recent resilience demonstrated by GCB during the pandemic, underpinned by its (1) solid capital buffers with a total capital adequacy ratio of 19.4% as of September 2021, supported by its solid internal capital generation capacity through its profitability, (2) high stock of liquid assets, with liquid banking assets at around 71% of tangible banking assets as of September 2021; and (3) deposit-based funding profile, supported by its well-established local retail deposit franchise.
STABLE OUTLOOK
The outlook on GCB Bank's long-term deposit ratings has been changed to stable, from negative outlook, in line with the stable outlook assigned to Ghana's ratings. The stable outlook balances the ongoing challenges in the operating environment against the bank's resilient capital, funding and liquidity profile.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
GCB Bank's ratings could be downgraded if the sovereign rating is downgraded or if the bank's financial metrics weaken materially, beyond those of similarly rated global peers.
GCB Bank's ratings could be upgraded if the sovereign rating is upgraded and if the bank's financial metrics, specifically its asset quality, improves from the level seen in September 2021.
LIST OF AFFECTED RATINGS
..Issuer: GCB Bank PLC
Downgrades:
....Adjusted Baseline Credit Assessment, Downgraded to caa1 from b3
....Baseline Credit Assessment, Downgraded to caa1 from b3
....Long-term Counterparty Risk Assessment, Downgraded to B3(cr) from B2(cr)
....Long-term Counterparty Risk Ratings, Downgraded to B3 from B2
....Long-term Bank Deposit Ratings, Downgraded to Caa1 from B3, Outlook Changed To Stable From Negative
Affirmations:
....Short-term Counterparty Risk Assessment, Affirmed NP(cr)
....Short-term Counterparty Risk Ratings, Affirmed NP
....Short-term Bank Deposit Ratings, Affirmed NP
Outlook Action:
....Outlook, Changed To Stable From Negative
