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’.<\/p>\n
\u00a0Key Rating Drivers <\/strong><\/p>\n 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.<\/p>\n 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.<\/p>\n 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.<\/p>\n 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%).<\/p>\n