The countries where the risk remained negative include Kenya, with B+, Namibia, BB, Uganda, B+ and Ghana, B. With that rating, the bank says it will continue lending.
African development Bank Head office
Development Bank has scored the highest ever rating of Triple A, as a result of
the success of a historic capital increment and improved shareholder confidence
on the Bank’s lending activities.
The Fitch Ratings Agency, an
American-British company, said the AAA rating, which is the highest level for
any lending institution, affirmed the Bank’s financial stability and
demonstrated the Bank held stable assets based on its lending portfolio.
“Fitch assesses AfDB’s
overall exposure to risks as Low, balance Moderate and credit risk with
Excellent risk management policies, Low concentration and Very Low equity and
market risks,” the ratings Agency said in its assessment.
The Bank was rated highly
based on an assessment of its lending practices and the ability of the
institutions to which the funds have been lent to repay without high levels of
The current rating is based
on the focus that the Bank’s assets will be fully covered by the amount of
bonds and other capital market products which are due for repayment and would
be repaid before the maturity date.
The Fitch rating is supported
by the Bank’s Standalone Credit Profile, reflecting the lower of ratings of an
AA- for solvency and AAA for liquidity. Fitch adjudged the Bank
triple A status based on the forecast that the Bank’s debt will be serviced on
time and the fact that the Bank’s shareholders have continued to express a strong
vote of confidence in the Bank’s capability to manage its assets.
The Fitch projects the Bank
would continue to expand its loaning portfolio by a massive 8% over the next
year, supported by the fresh capital injection from the shareholders and the slowdown
in the amount of non-performing loans.
While the prospect of certain
countries with the highest percentage of debts having had their sovereign
ratings downgraded appearing to dim the financial prospects of the improved
debt-servicing levels, the Bank’s solvency level appeared strong, backed by a
stronger capital base, according to Fitch.
“Fitch views the African
Development Bank’s risk-management policies as conservative and assesses them
as excellent in line with the AAA-rated peers. The concentration risk is low,
with the Bank’s five largest exposures accounting for the 32% of the total
Banking portfolio at end of 2020,” Fitch said in its report.
The average rating of loans
and guarantees deteriorated to B+ as end of 2020 from BB- at the end of 2020.
This was driven by the downgrade of several large borrowers, including Morocco,
which accounts for 14% of the risk exposure.
Morocco’s sovereign ratings
dropped to BB+/Stable, while Tunisia, at B-Negative, accounts for 10% of the
risk, while South Africa, rated BB-Negative, accounted for 6%. About 30% of the
loans were extended to countries and organisations based in countries where the
outlook remained negative.
The countries where the risk
remained negative include Kenya, with B+, Namibia, BB, Uganda, B+ and Ghana, B.
Fitch Ratings said a single
notch downgrade of those exposures would not affect the bank’s portfolio.
“Fitch assesses the African
Development Bank’s business environment as Medium Risk balancing Low, business
profile risk with high Risk balance.
The Bank’s lending portfolio
is to a larger extent based at the Medium Risk profile countries while the high
operating environment risk is consistent with the low ratings, low income per
capita and high political risk in countries of operation.