Ra­tios down

Business Daily (Kenya) - - MONEY & MARKETS -

Brian Ngugi

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

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