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AfrElec INVESTMENT AfrElec
Fitch Affirms African Development
Bank at AAA; outlook stable
AFRICA FITCH Ratings has affirmed the African Devel- fallen to 88% as of 1Q21, supported by the receipt
opment Bank’s (AfDB) long-term issuer default of paid-in capital payments under the GCI.
rating (IDR) at AAA with a Stable Outlook, the The average rating of loans and guarantees
rating agency said in a statement. deteriorated to B+ as of end-2020, from BB- at
AfDBs AAA Long-Term IDR is driven by the end-2019. This was driven by a downgrade of
extraordinary support it receives from its share- several large borrowers, namely Morocco (BB+/
holders, which Fitch assesses at aaa. The rating is Stable; accounting for 14% of total banking expo-
also supported by the banks Standalone Credit sure), Tunisia (B-/Negative; 10%) and South
Profile (SCP), reflecting the lower of its ratings Africa (BB-/Negative; 6%).
of aa- for solvency and aaa for liquidity. About 30% of loans are extended to entities
Fitch assesses AfDB’s support rating at aaa, based in countries where the outlook on the sov-
based on its forecast that the bank’s net debt will ereign is Negative (also including Kenya (B+),
be fully covered by callable capital from AAA- Namibia (BB), Uganda (B+) and Ghana (B)).
rated member states by 2023, the end of our fore- A single-notch downgrade of those exposures
cast period. would not affect our estimate of the weighted
The strong propensity of shareholders to sup- average rating of the bank’s portfolio. Fitch does
port translates into a zero-notch adjustment to not therefore expect further weakening in the
the capacity to support. credit quality of loans and guarantees, which
Fitch projections assume annual growth of would remain at BB- after a one-notch uplift for
about 8% in lending operations and a capital the bank’s preferred creditor status.
increase in line with the banks General Capital Non-performing loans (NPLs) decreased
Increase (GCI) VII plan. to 2.8% of gross loans in 2020 and 2.9% as of
In 2020 and 2021, 44 member states com- end-1Q21 from 3% at end-2019.
pleted their GCI subscriptions, representing 73% This was driven by clearance of Somalia’s
of the bank’s shareholding. arrears, a write-off of a non-sovereign loan and
In 2020, the AfDB allocated $6.9bn under its an increase in the size of the loan portfolio.
COVID-19 Response Facility to ease the eco- AfDB has an ESG Relevance Score (ESG.
nomic impact of the pandemic. RS) of 4[+] for Human Rights, Community
However, this came at the expense of other Relations, Access & Affordability. The AfDB is
operations and overall loan approval almost part of the African Development Bank Group,
halved in 2020. This decline in loan approval is which extends concessional loans and grants
in sharp contrast with the trend in other regional to low-income countries through the African
multilateral development banks and reflects the Development Fund. This supports AfDB’s pol-
constraint from the AfDB’s own capitalisation icy importance and shareholders’ propensity to
framework, with a capital utilisation rate at 86% support the bank. This has a positive impact on
as of end-2019, close to its 100% maximum limit. the credit profile and is relevant to the ratings in
After peaking in mid-2020 (100%), the rate had conjunction with other factors.
Week 29 22•July•2021 www. NEWSBASE .com P7
