Fitch Ratings Revises EBID’s Outlook to Stable; Affirms at ‘B’
Fitch Ratings – Paris – 20 Apr 2022: Fitch Ratings has revised the Outlook on Banque d’investissement et de developpement de la CEDEAO’s (EBID) Long-Term Issuer Default Rating (IDR) to Stable from Negative and affirmed the IDR at ‘B’.
Key Rating Drivers
Reduced Pressure on Solvency: The Outlook revision primarily reflects the reduction in our solvency risk assessment due to an improvement in non-performing loans (NPLs). The clearance of a significant portion of capital arrears by shareholders also supports our assessment of EBID’s solvency.
Strong Capitalisation, High Credit Risk: EBID’s ‘B’ rating balances its ‘Strong’ capitalisation against its ‘High’ credit risk. The bank’s Standalone Credit Profile of ‘b’ results from ‘bb’ solvency and liquidity assessments, and a negative three-notch adjustment to reflect the bank’s ‘High Risk’ business environment.
Clearance of Arrears Supports Capital: In 2021, EBID’s shareholders’ equity was supported by the payment of sizeable capital arrears (U.A.44 million) which enhanced the bank’s capitalisation despite the marked 25% increase in the loan book. The equity/assets ratio declined to 40% at end-2021 from 42% at end-2020 and Fitch’s risk-weighted capital (FRA) ratio was 36% as of end-2021, from 39% as of end 2020. Fitch expects the ratios to decline in line with the growth in the loan book to a level commensurate with a ‘Strong’ assessment.
Decline in NPLs: Bank-reported NPLs fell to 5.8% in 2021 from 7.1% in 2020 driven by the increase in the loan book and the absence of new NPLs. Fitch’s own NPL ratio fell to 9.8% at end-2021 from 15.6% at end-2020. Fitch’s ratio accounts for the exposures that were granted payment suspension during the Covid-19 crisis and had not resumed payments at end-2021 (4% of loans). Fitch expects the NPL ratio to decline further, driven by the growth in the loan book, but to remain ‘High’ (above 6%).
Source : Fitch Ratings, ( 20 Apr 2022) . Retrieved from https://www.fitchratings.com/research/sovereigns/fitch-ratings-revises-ebid-outlook-to-stable-affirms-at-b-20-04-2022#:~:text=Fitch%20Ratings%20%2D%20Paris%20%2D%2020%20Apr,the%20IDR%20at%20’B‘.
