LT & ST national scale ratings of ABC Holdings & BancABC Botswana placed on Ratings Watch Evolving
Johannesburg, 5 August
2019– GCR Ratings (“GCR”) has placed African Banking Corporation Holdings’
(“ABCH” , ”the group”) long and short-term Botswanan national scale ratings of
B(BW)/ B(BW and the
African Banking Corporation of Botswana’s (“BancABC Botswana”, “the bank”) long
and short-term national scale ratings of BBB-(BW)/ A3(BW)
on Ratings Watch Evolving.
The Ratings Watch Evolving
reflects the proposed equity swap transaction between Atlas Mara, ABCH’s
shareholder, and Kenya-based Equity Group Holdings Plc (‘EGH”), which would
have a material impact on the organisational structure and financial profile of
the ABCH, should it materialise. The transaction will see three of ABCH’s
subsidiaries, namely BancABC Mozambique, BancABC Tanzania, BancABC Zambia, alongside
Atlas Mara’s Rwanda operations, being swapped for approximately 6.27% shareholding
in EGH by Atlas Mara.
ABCH is expected to
retain BancABC Botswana, the group’s flagship, and BancABC Zimbabwe. However, due
to the severe depreciation of the Zimbabwean local currency versus the United
States Dollar, the significance of the Zimbabwean assets to the wider banking
group has significantly diminished. As a result, ABCH is expected to be smaller,
and more concentrated, but less exposed to countries with inherently weaker
Due to limited
information, we cannot ascertain the expected financial impact on the group.
ABCH’s rating of B(BW)
currently balances the wider group’s strengths and weaknesses alongside the
inherent structural subordination, very high double leverage of 8.9x, weak
liquidity and poor profitability of the non-operating holding company.
The current rating of BancABC Botswana reflects
currently adequate levels of capitalisation, supported by durable internal
capital generation, alongside a fairly granular loan book and currently low
levels of non-performing loans, albeit with low levels of reserve coverage. The
ratings are restrained by limited scale, high funding concentrations and modest
balance sheet liquidity.
We expect to resolve the ratings watch within the next six months, when
we have more certainty regarding the transaction and its impact on the group.
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.