 Plc’s capital adequacy ratio (CAR) has diminished due to adverse currency translation){kind=link}
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Ecobank Transnational Incorporated (ETI) Plc’s capital adequacy ratio (CAR) has diminished due to adverse currency translation across the major economies on the continent, according to research house Chapel Hill Denham Limited.
But the research house notes that the deteriorating CAR was partially offset by local currency assets within risk weighted assets (WAR), resulting in a relatively minor impact on regulatory capital.
ETI’s capital adequacy ratio dipped to 13.70 percent in June 2023 from 14.20 as at December 2022.
“We attribute the foreign exchange pressures to reform in Nigeria, fiscal related challenges in Ghana, as well as inflation in Zimbabwe and South Sudan,” said the analysts.
The African continent always feels the pang of global macro shocks or uncertainties because their economies, unlike Europe, the United States, and Asian countries, are not built on solid foundations.
Of course the Russia and Ukraine that jerked up oil prices and stoked inflation is forcing central banks across the globe to hike interest rates to tame inflation.
In Nigeria, aside from the aforementioned, there has been pressure on the local currency immediately after the unification of the exchange rate in June by the president Bola Ahmed Tinubu administration, while the removal of subsidies on Premium Motor Spirit (PMS) ballooned inflation, compounding the woes of Nigerians.
The currency devaluation is a double edge sword because it created foreign exchange gains for banks while at the same time bloating impairment on financial assets and there are fears that lenders could book huge paper losses if the central bank clings to a hawkish tone.