Announcements Financial Institutions Rating Alerts

LT & ST national scale ratings of ABC Holdings & BancABC Botswana placed on Ratings Watch Evolving

Rating Action

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.

Rating rationale

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 operating environments. 

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.

Analytical Contacts

Primary analyst Nyasha Chikwengo Financial Institutions Analyst
Johannesburg, ZA     nyashac@GCRratings.com +27 11 784 1771
     
Secondary analyst Kudzanai Samanga Financial Institutions Associate
Johannesburg, ZA     kudzanais@GCRratings.com +27 11 784 1771
     
Committee chair Matthew Pirnie Sector Head: Financial Institutions
Johannesburg, ZA matthewp@GCRratings.com +27 11 784 1771

Ratings History

ABCH

Rating class Review Rating scale Rating class Outlook Date
Issuer Long Term Initial National BBB- (BW) Negative December 2004
  Last National B (BW) Negative December 2018
Issuer Short Term Initial National A3 (BW) N/A December 2004
  Last National B (BW) N/A December 2018

BancABC Botswana

Rating class Review Rating scale Rating class Outlook Date
Issuer Long Term Initial National BBB- (BW) Positive June 2004
  Last National BBB- (BW) Stable June 2018
Issuer Short Term Initial National A3 (BW) N/A June 2004
  Last National A3 (BW) N/A June 2018


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