Johannesburg, 10 Jul 2013 — Global Credit Ratings has today affirmed the long term national scale and affirmed the short term national scale issuer ratings assigned to BancABC Mozambique of BBB-(MZ) and A3(MZ) respectively; with the outlook accorded as Negative. The rating(s) are valid until 6/2014.
RATING RATIONALE
Global Credit Ratings has accorded the above credit rating(s) on BancABC Mozambique based on the following key criteria:
BancABC Moçambique was established in Moçambique in 1999 as a private commercial bank and became a subsidiary of ABC Holdings Ltd (“ABCH” or “the Group”) in 2002. ABCH is a financial services provider in sub Saharan Africa with operations in Zambia, Tanzania, Botswana and Zimbabwe. The accorded ratings reflect the bank’s established domestic franchise value and risk appropriate capitalisation. The level of financial and operational support offered by the bank’s parent company was also favorably considered.
The total risk weighted capital adequacy ratio declined to 17.9% as at FYE12 (FYE11: 22%), although remaining well above the regulatory minimum of 8%. Shareholders injected US$3.5m during 2HF12 to support the banks retail expansion drive. Key asset quality indicators weakened during F12, with gross non-performing loans (“NPLs”) increasing by 21.6% to MT296m as at FYE12. Consequently, gross non-performing loans (“NPLs”) amounted to 8.4% of gross loans as at FYE12, up from 4.5% as at FYE11. Overall, net NPLs increased to 14.7% of capital from 2.7% in the previous year. A pre-tax profit of MT97.4m was recorded for F12, down 41.7% from the previous period. The earnings performance was impacted by higher impairment charges, an increase in operating costs mainly related to retail rollout costs and a decline in non-interest income. The structural makeup of the bank’s funding base remains an issue with high depositor concentration and an extremely short maturity structure. Liquidity risk is partly ameliorated through maintaining a liquid balance. Liquid & trading assets covered short-term funding by a higher 45% (FYE11: 40%), and amounted to 34% (FYE11: 35%) of total assets as at FYE12.
A further decline in earnings and asset quality, due to the lag between the growth in advances and the emergence of risk from new loans would place ratings under pressure. Furthermore, adverse economic developments, on the back of a weak global market could culminate in an increase in the level of distressed borrowers, and impact the bank’s ability to mobilise funding. However, the strenthening of asset quality indicators and a positive earnings growth trend, while maintaining credit protection ratios, will be considered positively.
NATIONAL SCALE RATINGS HISTORY | |
Initial rating (Dec/2004) | |
Long term: BBB-(MZ); Short term: A3(MZ) | |
Outlook: Stable | |
Last rating (Jun/2012) | |
Long term: BBB-(MZ); Short term: A3(MZ) | |
Outlook: Negative | |
ANALYTICAL CONTACTS | |
Primary Analyst | |
Jennifer Mwerenga | |
Senior Analyst | |
+27 11 784 1771 | |
jennifer@globalratings.net | |
Committee Chairperson | |
Dirk Greeff | |
Sector Head: Financial Institution Ratings | |
+27 11 784 1771 | |
dgreeff@globalratings.net | |
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
GCR’s Criteria For Rating Banks, 2013
The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the ratings.
RATING LIMITATIONS AND DISCLAIMERS
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SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument.
BancABC Mozambique participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The credit rating/s has been disclosed to BancABC Mozambique with no contestation of the rating.
The information received from BancABC Mozambique and other reliable third parties to accord the credit rating included the latest available audited annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, full year detailed budgeted financial statements, most recent year to date management accounts, corporate governance and enterprise risk framework, reserving methodologies, capital management policy, Industry comparative data and regulatory framework and a breakdown of facilities available and related counterparties.