The GCR Financial Institutions Sector Risk Assessment
The Financial Institutions sector risk score (ranging from 0 to 15) is a key factor in the operating environment component score. The core of the GCR Ratings Framework is based on GCR’s opinion that an entity’s operating environment largely frames its creditworthiness. As a result, the operating environment analysis anchors the underlying risk score for the GCR rating methodology. GCR combines elements of the country risk and sectoral risk analysis, blended across countries for entities operating across multiple jurisdictions, to anchor an insurer to its current operating conditions. For more details on any of the above, please read the related criteria and research listed below.
GCR periodically publishes updated “Financial Institutions Sector Risk Scores”, which supersede previous publications. The publication titled “GCR Financial Institutions Sector Risk Scores, 17 August 2020”, available at https://gcrratings.com/risk-scores/, supersedes the article published on 17 July 2020.
Namibian Financial Institutions Sector Risk score: ‘6.0’. Country Risk Score 5.5, Mapping Table 5.5 to 6.0
The reduction in the Namibian Financial Institutions sector risk score comes on the back of a significant weakening in the operating environment, which is expected to result in deteriorating asset quality, although overall sector stability is likely to be supported by sound capitalisation and oligopolistic sector structure. The strong capitalisation and oligopolistic characteristics of the Namibian banking sector is expected to enable them to cope with rising asset risk, at least over the short to medium term. We currently expect non-performing loans to increase to 5.5%-6.0% by FY2020. However, there is a real risk that economic conditions will remain depressed much longer than expected and asset quality will deteriorate even further. This may lead to a dilution in capital adequacy through moderated earnings, but still adequate to support sufficient internal capital generation. This, together with liquid and stable balance sheets, is likely to offer a medium-term safety net for the sector as a whole, which has shown resilience through three years of weak economic activity in the lead up to the pandemic.
Senior Financial Institution Analyst
+27 11 784 1771
Group Head of Ratings
+27 11 784 1771
Related criteria and research
Criteria for the GCR Ratings Framework, May 2019
Criteria for Rating Financial Institutions, May 2019
GCR Ratings Scales, Symbols & Definitions, May 2019
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.