Announcements

Agribank’s rating reaffirmed

GCR has retained Agricultural Development Bank of Zimbabwe’s (“Agribank”) long term national scale rating of BBB (triple B). The rating remains on Rating Watch. Agribank was established in 1999 following the attainment of a commercial banking license by the then Agricultural Finance Corporation (“AFC”). The Government of Zimbabwe wholly owns the bank through an equal shareholding split between the agriculture and finance ministries. Agribank’s established track record and important role in facilitating government’s efforts to stimulate Zimbabwe’s agriculture sector benefited the rating. Government remains the financier’s sole shareholder. However, on the back of a dollarised economy, government plans to dispose part of its shareholding to an at yet unknown strategic partner in a bid to raise additional capital to fund operations.

Capital & reserves grew by 145% to US$14.9m as at FYE10 (FYE09: US$6.7m), supported by tier I capital injections. Government injected US$17m during F10, in a bid to strengthen the bank’s underwriting capacity and align capital levels to the new minimum regulatory capital requirement of US$12.5m post dollarisation. However, with the bulk of the capital (US$12m) received towards the end of F10, the support was not immediately felt, with the bank recording an accelerated loss of US$8m (including retrenchment costs totalling US$1m) in F10. Notwithstanding this, the bank displayed a capital adequacy ratio of 28% as at FYE10, which was well above the regulatory minimum of 10%. The results for 1HF11 reflected a decline in losses to US$0.4m on the back of increased funding (including an additional capital injection of US$1.25m) and the resultant increase in earning assets. Following significant loan growth, arrears amounted to 3.8% of gross loans as at FYE10. The net non-performing loan (“NPL”) and net NPLs/capital ratios increased to 1.9% and 3.8% respectively as at FYE10. Liquidity risk remains a major challenge for Zimbabwean banks due to low market liquidity, the limited capacity of the central bank to act as a lender of last resort and the lack of a functional interbank market. Notwithstanding this, the bank’s liquidity ratio climbed to 36% (FYE09: 28%) as at FYE10, which was well above the prudential minimum of 20%. Agribank’s financial flexibility stems mainly from long-established government support. However, post dollarisation, Agribank has also significantly relied on customer deposits, a major shift from prior years, when funding was predominantly sourced from government grants for specific agricultural related on-lending to rural small-scale farmers and concessional agriculture facilities. Furthermore, the bank secured a US$30m line of credit in March 2011 from the Industrial Development Corporation of South Africa (“IDC”) for on-lending.

Jennifer Mwerenga
https://globalratings.net/uploads/files/October_2011.pdf

image_pdfPDF View

Leave a Reply



ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.

Copyright 2019 GCR INFORMATION PUBLISHED BY GCR MAY NOT BE COPIED OR OTHERWISE REPRODUCED OR DISCLOSED, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT GCR’S PRIOR WRITTEN CONSENT. Credit ratings are solicited by, or on behalf of, the issuer of the instrument in respect of which the rating is issued, and GCR is compensated for the provision of these ratings. Information sources used to prepare the ratings are set out in each credit rating report and/or rating notification and include the following: parties involved in the ratings and public information. All information used to prepare the ratings is obtained by GCR from sources reasonably believed by it to be accurate and reliable. Although GCR will at all times use its best efforts and practices to ensure that the information it relies on is accurate at the time, GCR does not provide any warranty in respect of, nor is it otherwise responsible for, the accurateness of such information.GCR adopts all reasonable measures to ensure that the information it uses in assigning a credit rating is of sufficient quality and that such information is obtained from sources that GCR, acting reasonably, considers to be reliable, including, when appropriate, independent third-party sources. However, GCR cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall GCR have any liability to any person or entity for (a) any loss or damage suffered by such person or entity caused by, resulting from, or relating to, any error made by GCR, whether negligently (including gross negligence) or otherwise, or other circumstance or contingency outside the control of GCR or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits) suffered by such person or entity, as a result of the use of or inability to use any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained in each credit rating report and/or rating notification are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained in each credit rating report and/or rating notification must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY GCR IN ANY FORM OR MANNER WHATSOEVER.