Johannesburg, 30 May 2013 — Global Credit Ratings has today affirmed the long term national scale and accorded the short term national scale issuer ratings assigned to Standard Chartered Bank of Zimbabwe of AA-(ZW) and A1+(ZW) respectively; with the outlook accorded as Negative. The rating(s) are valid until 5/2014.
Global Credit Ratings has accorded the above credit rating(s) on Standard Chartered Bank of Zimbabwe based on the following key criteria:
The ratings are based on the bank’s established franchise value, as well as its ability to leverage off the global/international brand and support from its parent – Standard Chartered Plc. The bank displayed a strong capital cushion (ending the period above the US$50m regulatory minimum required by end-June 2013), supporting its loss absorption capacity. Moreover, the positive earnings prospects should sufficiently boost the equity base to achieve the new capital level of US$100m and increase the risk-bearing capacity of the bank.
The loan portfolio continues to perform well owing to strong underwriting and a high net-worth client pool, which mitigate some of the bank’s credit risk. Gross non-performing loans/assets (at 1.7%) were among the lowest among the bank’s peers.
Although Stanchart employs a prudent approach to liquidity management, liquidity risk is exacerbated by a weak saving culture, depositor security concerns, high value withdrawal transactions, an inactive interbank market, no lender-of-last resort and the constrained access to offshore facilities.
The ‘negative rating outlook’ reflects the considerable uncertainty surrounding the implementation of the indigenisation and economic empowerment policy, while also taking cognisance of the ability of the country’s banks to restore confidence and stability in the financial sector. Although indications are that the central bank is working with Government to ensure compliance is achieved in an orderly manner, the outcome and finalisation remains uncertain.
A weakened support floor, or in the worst case, the complete absence thereof, will negatively affect the rating. Moreover, the rating could be affected if asset quality or capital cushion and earnings power shows any further weakness. Given the bank’s fragile operating environment (both political and economic) an upgrade is unlikely in the near future.
NATIONAL SCALE RATINGS HISTORY
Initial rating (Sep/2000)
Long term: AA-(ZW); Short term: A1+(ZW)
Last rating (Aug/2012)
Long term: AA-(ZW)
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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.
Standard Chartered Bank of Zimbabwe 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 Standard Chartered Bank of Zimbabwe with no contestation of the rating.
The information received from Standard Chartered Bank of Zimbabwe 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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