December 14, 2020
by Moody’s Investors Service
Moody’s Investors Service (“Moody’s”) has taken various ratings actions on some ratings of 32 banks across 10 African countries: Angola, Democratic Republic of Congo, Egypt, Ghana, Kenya, Morocco, Nigeria, Tanzania, Tunisia and Uganda.
The rating actions are driven by changes in the local currency (LC) and foreign currency (FC) country ceilings applied to the jurisdictions of the banks following the publication of Moody’s updated Country Ceilings Methodology on 7 December 2020.
As a result of the methodology change, FC ceilings for FC deposits were raised in 9 African countries (Angola, Egypt, Ghana, Kenya, Morocco, Nigeria, Tanzania, Tunisia and Uganda), resulting in upgrades of FC deposits of 31 banks in these jurisdictions.
At the same time, FC ceilings applicable to debt obligations were lowered in 3 African countries (Angola, Democratic Republic of Congo and Nigeria), resulting in downgrades of FC counterparty risk ratings of 6 banks in these jurisdictions.
Today’s rating actions cover: (1) Banco Angolano de Investimentos, S.A., (2) Banco de Fomento Angola, S.A., (3) Banque Commerciale du Congo S.A., (4) Bank of Alexandria SAE, (5) Banque du Caire SAE, (6) Banque Misr SAE, (7) Commercial International Bank (Egypt) SAE, (8) National Bank of Egypt SAE, (9) GCB Bank Limited, (10) Co-operative Bank of Kenya Limited, (11) Equity Bank (Kenya) Limited, (12) KCB Bank Kenya Limited, (13) Attijariwafa bank, (14) Bank of Africa – BMCE Group, (15) Credit du Maroc, (16) Groupe Banque Centrale Populaire, (17) Access Bank Plc, (18) FCMB (First City Monument Bank) Limited, (19) Fidelity Bank plc, (20) First Bank of Nigeria Limited, (21) Guaranty Trust Bank Plc, (22) Sterling Bank Plc, (23) Union Bank of Nigeria plc, (24) United Bank for Africa Plc, (25) Zenith Bank Plc, (26) CRDB Bank Plc, (27) NMB Bank PLC, (28) Amen Bank, (29) Arab Tunisian Bank, (30) Banque de Tunisie, (31) Banque Internationale Arabe de Tunisie and (32) Stanbic Bank Uganda Limited.
Ratings Rationale
Today’s rating actions on 32 banks in Africa are driven by changes in country ceilings under Moody’s updated country ceilings methodology. Country ceilings typically indicate the highest rating level that would generally be assigned to the financially strongest obligations of issuers domiciled in a country, absent exceptional considerations such as external support from outside the country.
The updated ceilings methodology has unified deposit ceilings with the typically higher debt ceilings, whereby LC and FC country ceilings are no longer distinguished between deposit and debt ceilings. These changes reflect Moody’s view that the risks that affect access to bank deposits are not materially different from those that affect the ability of banks and non-banks to service their debt obligations.
National Scale Ratings (NSRs)
As a result of the upgrade in the FC long-term deposit ratings of 13 banks in Morocco and Nigeria, Moody’s also upgraded the FC NSR long-term deposit ratings of those 13 banks.
At the same time, Moody’s also upgraded the FC NSR short-term deposit ratings of 9 Nigerian banks and downgraded the FC NSR counterparty risk ratings of 3 Nigerian banks.
Outlook
The outlooks on deposit and/or senior debt ratings for 27 of the 32 banks affected by today’s rating actions remain unchanged.
At the same time, Moody’s has assigned a stable outlook to foreign currency long-term deposit ratings of 5 Egyptian banks: Bank of Alexandria SAE, Banque du Caire SAE, Banque Misr SAE, Commercial International Bank (Egypt) SAE and National Bank of Egypt SAE.
Factors That Could Lead to An Upgrade Or Downgrade of The Ratings
Angola
An upgrade of Angola’s sovereign rating and improvements of banks standalone credit profiles could put upward pressure on banks’ ratings.
Any deterioration in the Angolan banking macro profile and/or in the creditworthiness of Angola government will likely result in downgrades of banks’ ratings. A deterioration in the banks’ standalone profiles beyond what is captured in the current ratings could also lead to downgrades.
Democratic Republic of Congo (DRC)
Upwards pressure on the ratings of Banque Commerciale du Congo could result from an improvement in asset quality or capitalisation, or an improvement in DRC’s operating environment.
Downwards pressure on the ratings of Banque Commerciale du Congo could result from a significant deterioration in asset quality or a material weakening in funding and liquidity.
Egypt
Egyptian banks’ ratings could be upgraded if there is a further strengthening of the operating and macroeconomic environment, accompanied by an upgrade of Egypt’s sovereign rating and combined with banks’ resilient financial performance.
Downward pressure on Egyptian banks’ ratings would develop following a downgrade of the sovereign rating, reflecting the high interlinks between the banks’ credit profile and that of the government. Downward pressure on banks’ BCA could also develop from a greater-than-expected deterioration in asset quality, or a decline in the banks’ capital, profitability and foreign currency liquidity buffers.
Ghana
Any upward rating pressure on GCB Bank’s ratings is limited given the negative outlook. The bank’s outlook could change back to stable if the sovereign rating outlook is changed back to stable and if the bank’s financial metrics remain commensurate to similarly rated global peers.
GCB Bank’s ratings could be downgraded if the sovereign rating is downgraded, given the sizable holding of sovereign debt securities, or if Ghana’s operating environment weakens or if the bank’s financial metrics weaken materially, beyond the thresholds assumed by the current rating level.
Kenya
Any upward rating pressure on the Kenyan banks’ ratings is limited given the negative outlook. The banks’ outlook could change back to stable if the sovereign rating outlook is changed back to stable and if Moody’s assesses that the Kenyan operating environment has not significantly deteriorated and if the banks’ financial metrics remain at least commensurate to similarly rated global peers.
Kenyan banks’ ratings could be downgraded if the sovereign rating is downgraded, given the banks’ sizeable holdings of sovereign debt securities, or if Moody’s expects Kenya’s operating environment to weaken or if the banks’ financial metrics weaken materially, beyond the thresholds assumed by the current rating level.
Morocco
Upwards pressure on the long-term ratings of Moroccan banks is limited given their positioning at the same level as the sovereign rating. Upwards pressure on their BCAs could develop through improved asset quality and capitalisation, and/or a material improvement in the operating environment of the various Sub-Saharan jurisdictions in which the Moroccan banks with cross-border operations operate.
Downwards pressure on the ratings of Moroccan banks could develop from a deterioration in the sovereign’s credit profile, or a weakening in the banks’ asset quality and capitalisation.
Nigeria
Upward rating momentum for Nigerian banks ratings is limited, given the negative outlook. However, a change in the sovereign rating outlook could lead to stabilisation of the banks’ outlook if they maintain resilient financial performance.
A downgrade of Nigeria’s sovereign rating would exert downward pressure on banks’ ratings given the interlinkages. In addition, any deterioration in banks’ financial profiles beyond what is captured in their current ratings could lead to downgrades.
Tanzania
Upwards pressure on the long-term ratings and BCAs of Tanzanian banks is limited given their positioning at the same level as the sovereign rating. A higher sovereign rating could lead to upwards pressure on the banks’ ratings.
Downwards pressure on the ratings of Tanzanian banks could develop from a deterioration in the sovereign’s credit profile, a weakening in the banks’ asset quality and capitalisation, and/or a significant decline in liquidity.
Tunisia
Upward pressure on banks’ ratings is limited as indicated by the negative outlook. However, the outlook on the ratings would likely be stabilised if Tunisia’s sovereign rating outlook is changed to stable from negative. This could also be conditioned by a material improvement in the banks’ asset quality, a reduction in provisioning requirements, an increase in loss-absorptions buffers and a material/sustained reduction in reliance on central bank funding.
Conversely, since all five Tunisian banks benefit from government support uplift from their respective BCAs, downward pressure on banks’ ratings would develop following a downgrade of the sovereign rating signaling a reduction in the government’s capacity to extend financial support to banks in case of need. Downward pressure on the BCAs of some banks could also develop from a greater-than-expected deterioration in operating conditions from the coronavirus spread weakening their asset quality, profitability, capital adequacy and/or liquidity.
Uganda
An upgrade of the bank’s ratings could be triggered by improvements in its financial profile.
Stanbic Uganda’s ratings could be downgraded in the event of a downgrade of Uganda’s ratings. Any significant deterioration in Stanbic Uganda’s financial performance could negatively impact the bank’s standalone credit profile and deposit ratings. The ratings could also be downgraded if we assess that SBG’s willingness to provide support is lower than our current assumptions.
