Johannesburg, 30 May 2013 — Global Credit Ratings has today affirmed the long term national scale and affirmed the short term national scale issuer ratings assigned to Bank of Africa Kenya Limited of A-(KE) and A1-(KE) respectively; with the outlook accorded as Stable. The rating(s) are valid until 5/2014.
Global Credit Ratings has accorded the above credit rating(s) on Bank of Africa Kenya Limited based on the following key criteria:
Bank of Africa Kenya Limited (“BOA Kenya” or “the bank”) is a member of Groupe Bank of Africa, a financial services group with operations spanning across 14 African countries mostly in West and East Africa. BMCE Bank the major shareholder (65%) is a large commercial bank in Morocco and brings strong strategic and operational support to the BOA Group, as well as access to international markets as a result of its presence in Europe and Asia. BMCE Bank is listed on the Casablanca Stock Exchange and had an asset base of US$27bn/EUR20.7bn as at FYE12.
The capital adequacy ratio declined to 13.8% in F12 from 16% in F11 due to a significant growth in risk assets , though still above the regulatory minimum of 12%. Shareholders injected €10m in April 2013 to strenghthen the capital base and support the bank’s strategy to penetrate the retail and SMEs sectors. In addition, the bank secured a US$25, 7- year credit facility from FMO to fund mortgage lending. Asset quality remained sound although reflecting significant deterioration in F12 on the back of challenging macroeconomic conditions. The gross NPLs ratio declined to 2.3% in F12 (F11: 1.7%), although still well below the industry average of 6.7%. Further, net non-perfoming loans remained negligible as a percentage of capital at 1.8%. NPBT grew by 14.7% (F11: 14.5%) to KShs636m in F12. The performance which was well below expectations was impacted by the high cost of funds and high operating costs (mainly expansion expenses).
Looking ahead, a 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. Conversely, a continuation of the profitability trend, while maintaining credit protection ratios, will be considered positive.
NATIONAL SCALE RATINGS HISTORY
Initial rating (Jun/2010)
Long term: A-(KE); Short term: A1-(KE)
Outlook: Positive outlook
Last rating (May/2012)
Long term: A-(KE); Short term: A1-(KE)
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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.
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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.
Bank of Africa Kenya Limited participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of info received was considered adequate and has been independently verified where possible.
The credit rating/s has been disclosed to Bank of Africa Kenya Limited with no contestation of the rating.
The information received from Bank of Africa Kenya Limited and other reliable third parties to accord the credit rating included the latest 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.
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