GCR Upgrades Greenwich Merchant Bank Ratings, Outlook Revised to Stable

GCR Ratings has upgraded the national scale ratings of Greenwich Merchant Bank Limited, reflecting the institution’s solid risk position, stable funding base, and robust capitalisation. The long-term issuer rating has been raised to BBB+(NG), while the short-term issuer rating has improved to A2(NG), both up from BBB(NG) and A3(NG), respectively. Additionally, the outlook for the bank has been revised from positive to stable.

GCR, a rating agency wholly owned by Moody’s Investors Service, highlighted that the upgrade is a result of Greenwich Merchant Bank’s continued strong financial performance and sustained growth trajectory. Since transitioning from an investment bank to a merchant bank in September 2020, Greenwich MB has achieved a remarkable four-year average annual growth rate of 37.2% in total assets, reaching N145.7 billion as of June 30, 2024.

“Greenwich’s operating revenues have shown considerable improvement, rising to N7.8 billion in the first half of 2024, up from N5.9 billion in 2023, driven by stable earnings from its core lending business,” GCR noted.

However, the agency pointed out that the bank’s competitive position is somewhat constrained by its smaller market share, contributing less than 1% to the broader banking sector’s assets. Additionally, Greenwich’s operational efficiency, as seen in its cost-to-income ratio of 69.6% in 2023, is weaker compared to peers.

The rating agency praised the bank’s capitalisation, noting a strong GCR core capital ratio of 53.7% as of December 31, 2023, up from 49.1% in the previous year. This strength is attributed to cautious growth in risk assets, a low-risk profile, and good earnings retention, reflecting solid shareholder support.

Looking ahead, GCR analysts expect the core capital ratio to moderate but remain within the highest band over the next 12-18 months, supported by a potential capital injection to align with the Central Bank of Nigeria’s new minimum capital requirements.

“We assessed risk at an intermediate level. Our consideration is supported by the sustenance of a well-contained risk profile, evidenced by the zero non-performing loans (NPLs) since inception and a moderate credit loss ratio of 0.7% as of June 30, 2024,” GCR added.

The agency also noted that Greenwich Merchant Bank’s funding and liquidity remain robust, supported by a stable structure primarily composed of customer deposits, which accounted for 93% of funding as of June 2024. Despite an elevated cost of funds at 10.5% in 2023 due to the wholesale nature of its business, the bank’s liquid assets to customer deposits ratio significantly improved to 59.8% in 2023.

GCR concluded that the stable outlook for Greenwich Merchant Bank reflects an expectation that the bank’s GCR core capital ratio will stay above 35% over the next 12-18 months, with sound asset quality and a cautious approach to lending. Funding and liquidity metrics are also expected to be maintained at solid levels.