Global rating agency Moody’s has affirmed the African Development Bank (AFDB) Aaa long-term issuer amidst worsening capital ratios.
The agency added AFDB’S long-term deposit ratings carry a stable outlook.
Moody’s said AFDB had solid though deteriorating capital adequacy when compared to Aaa-rated peers.
“The stable outlook takes into account the bank’s strong preferred creditor track record in its lending to sovereigns and Moody’s expectation that the historically very strong shareholder support will materialise in the form of the next general capital increase to start in 2020,” said Moody’s.
“This balances the AFDB’S deteriorating capital adequacy trend and the more challenging
operating environment, which is manifesting itself in the deteriorating asset quality in the non-sovereign loan portfolio.”
Moody’s, however, noted that while the AFDB’S capital and leverage ratios remain within the ranges of Its Aaa-rated peers, there was a “significant” deterioration in both key ratios in 2016.
“Specifically, after following a long-term declining trend, the bank’s asset coverage ratio declined by six percentage points to 40.9 per cent from 46.9 per cent in 2015, more than over the preceding fouryear period from 2011 to 2015 combined,” it said.
Moody’s warned against sharp expansion in AFDB loan approvals