Johannesburg, 8 October 2020 – GCR Ratings (“GCR”) has placed African Banking Corporation (Moçambique) SA’s national scale long and short-term issuer ratings of BB+(MZ) and B(MZ) respectively on Ratings Watch Evolving.
|Rated Entity / Issue||Rating class||Rating scale||Rating||Outlook / Watch|
|African Banking Corporation (Moçambique) SA||Long Term issuer||National||BB+(MZ)||Ratings Watch Evolving|
|Short Term issuer||National||B(MZ)|
The Ratings Watch Evolving is reflective of the announcement by Access Bank Plc of their acquisition of African Banking Corporation (Moçambique) S.A (“BancABC Moçambique”; “rated entity”) for cash following a definitive agreement with the shareholder ABC Holdings Limited, itself a wholly owned subsidiary of Atlas Mara Plc. The acquisition will be followed by a subsequent legal merger of BancABC Moçambique and Access Bank Mozambique, S.A, with the latter in possession of majority ownership.
It is expected that the post-merger entity will be better capitalised, with an enhanced product and service offering, and a broader geographical network. However, the transaction is contingent on conditions set by the parties involved, approval by the regulator, competition commissions and other vested stakeholders.
Due to limited information on the final legal and financial form of the post-merger entity, we cannot ascertain the full impact on BancABC Moçambique’s credit profile.
The current national scale rating of BancABC Moçambique of BB+(MZ) balances an improving risk position, a relatively concentrated funding base, albeit backed by adequate and improving levels of liquidity, modest competitive position, tight capital and volatile earnings profile.
We expect to resolve the ratings watch within the next six months, when we have more certainty regarding the transaction details and its impact on the rated entity.
|Primary analyst||Kudzanai Samanga||Financial Institutions Analyst|
|Johannesburg, ZA||kudzanais@GCRratings.com||+27 11 784 1771|
|Committee chair||Vinay Nagar||Senior Financial Institutions Analyst|
|Johannesburg, ZA||vinay@GCRratings.com||+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 Scale, Symbols & Definitions, May 2019|
|GCR Country Risk Scores, May 2020|
|GCR Financial Institutions Sector Risk Score, August 2020|
|GCR affirms BancABC Moçambique’s rating of BB+(MZ); Outlook Stable, July 2020.|
|Rating class||Review||Rating scale||Rating class||Outlook/Watch||Date|
|Long Term issuer||Initial||National||BBB-(MZ)||Stable||December 2004|
|Short Term issuer||Initial||National||A3(MZ)||n/a||December 2004|
|Last||National||B (MZ)||n/a||July 2020|
|Benefits||Financial reimbursement and other services provided to insureds by insurers under the terms of an insurance contract.|
|Capital||The sum of money that is invested to generate proceeds.|
|Financial Institution||An entity that focuses on dealing with financial transactions, such as investments, loans and deposits.|
|Liquidity||The speed at which assets can be converted to cash. It can also refer to the ability of a company to service its debt obligations due to the presence of liquid assets such as cash and its equivalents. Market liquidity refers to the ease with which a security can be bought or sold quickly and in large volumes without substantially affecting the market price.|
|Loan||A sum of money borrowed by a debtor that is expected to be paid back with interest to the creditor. A debt instrument where immovable property is the collateral for the loan. A mortgage gives the lender a right to take possession of the property if the borrower fails to repay the loan. Registration is a prerequisite for the existence of any mortgage loan. A mortgage can be registered over either a corporeal or incorporeal property, even if it does not belong to the mortgagee. Also called a Mortgage bond.|
|Market||An assessment of the property value, with the value being compared to similar properties in the area.|
|National Scale Rating||National scale ratings measure creditworthiness relative to issuers and issues within one country.|
|Performing Loan||A loan is said to be performing if the borrower is paying the interest on it on a timely basis.|
|Performing||An obligation that performs according to its contractual obligations.|
|Private||An issuance of securities without market participation, however, with a select few investors. Placed on a private basis and not in the open market.|
|Release||An agreement between the creditor and debtor, in terms of which the creditor release the debtor from its obligations.|
|Risk Management||Process of identifying and monitoring business risks in a manner that offers a risk/return relationship that is acceptable to an entity’s operating philosophy.|
|Risk||The chance of future uncertainty (i.e. deviation from expected earnings or an expected outcome) that will have an impact on objectives.|
|Short Term||Current; ordinarily less than one year.|
SALIENT POINTS OF ACCORDED RATINGS
GCR affirms that a.) no part of the ratings was influenced by any other business activities of the credit rating agency; b.) the ratings were based solely on the merits of the rated entity, security or financial instrument being rated; and c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument.
The credit ratings have been disclosed to BancABC Moçambique. The ratings above was solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the ratings.
BancABC Moçambique participated in the rating process via written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The information received from BancABC Moçambique and other reliable third parties to accord the credit rating included:
- Audited financial results of BancABC Moçambique as at 31 December 2019;
- A breakdown of facilities available and related counterparties; and
- Internal and external audit reports as at January 2020;
- Industry comparative data.