Announcements

No rating impact on PTA Bank from Trust Bank’s liquidation

Johannesburg, 28 February 2014 – PTA Bank’s long- and short-term national scale issuer ratings of AA+(KE) and A1+(KE) (Stable outlook) and long-term international scale issuer rating of BB+ (Stable outlook), have not been impacted by the announcement of Trust Bank’s liquidation in November 2013. The rating(s) remain valid until 9/2014.

The Eastern and Southern African Trade and Development Bank’s (“PTA Bank” or “the Bank”) exposure to Trust Bank Limited (“Trust Bank”), a commercial bank in Zimbabwe, which is now under liquidation subsequent to the withdrawal of its banking license by the Reserve Bank of Zimbabwe in November 2013, has prompted an interim review of the bank’s financial position and published ratings. This stems from the bank’s US$3m gross loan facility extended to Trust Bank.

PTA Bank’s management advised that they were aware of the developments and discussions are ongoing with Trust Bank’s management to recover the loan. PTA Bank has taken a prudent approach by making a full provision of the loan. The loan is 100% secured by tangible securities. The underlying assets pledged as security for the facility include properties with a fair value of around US$3.7m. Further, PTA Bank enjoys Preferred Creditor status with Trust Bank and recovery prospects are high. The gross exposure was 0.1% of gross loans and 0.6% of the capital base as at FYE13.

The Bank is well capitalised, with a capital base of US$387.7m as at IHF13 and a risk adjusted capital adequacy ratio of 33%, calculated in line with Basel II requirements (internal minimum 30%). Financial flexibility is further bolstered by the Bank’s access to substantial callable capital (US$1bn) which provides a significant degree of support. The adjusted gross non-performing loans (“NPLs”) ratio amounted to 4.7% as at IHF13. Adjusted Net NPLs remained negligible as a percentage of capital at 4%, as at IHF13 (FYE12: 6.8%). A profit of US$26.3m was recorded for IHF13, representing growth of 30%, supported by loan disbursements, controlled costs and higher margins, notwithstanding a rise in impairment charges. The international foreign currency rating is underpinned by the diversified shareholding, which ameliorates sovereign interference risk. However, the rating was constrained by the low sovereign ratings of countries in which PTA Bank extends loans. The majority of cash and liquid assets are US Dollar denominated and placed with reputable counter-parties with high international ratings. Additionally, asset/liability maturities are generally matched.

Positive movement/s: Future developments that could lead to an upgrade include a positive earnings trend, while maintaining credit protection factors and a further strengthening of the equity base.

Negative movement/s: Though a downward movement of the rating is considered unlikely at this stage, deterioration in the Bank’s capital adequacy, portfolio quality and liquidity metrics, as well as evidence of risk and corporate governance weakness, could warrant a downward revision of the Bank’s ratings.

NATIONAL SCALE RATINGS HISTORY INTERNATIONAL SCALE RATINGS HISTORY
Initial rating (Nov/2004) Initial rating (Nov/2004)
Long term: AA(KE); Short term: A1(KE) Long term: BB
Outlook: Stable Outlook: Stable
Last rating (Sep/2013) Last rating (Sep/2013)
Long term: AA+(KE); Short term: A1+(KE) Long term: BB+
Outlook: Stable Outlook: Stable
ANALYTICAL CONTACTS
Primary Analyst
Jennifer Mwerenga
Senior Analyst
+27 11 784 1771
jennifer@globalratings.net
Committee Chairperson
Dirk Greeff
Head: Financial Institutions Ratings
+27 11 784 1771
dgreeff@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

GCR’s Global Master Criteria for rating Banks and Other Financial Institutions
Kenya Bank Bulletin (December 2013)
Previous company reports (up to 2013)

RATING LIMITATIONS AND DISCLAIMERS ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.NET/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: HTTP://GLOBALRATINGS.NET/RATINGS-INFO/RATING-SCALES-DEFINITIONS. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF

SALIENT FEATURES OF ACCORDED RATINGS

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.

PTABank participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The credit rating/s has been disclosed to PTA Bank with no contestation of the rating.

The information received from PTABank and other reliable third parties to accord the credit rating included the December 2012 audited annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, full year detailed budgeted financial statements, unaudited management accounts to 1HF13, 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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ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

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.

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