Rwandan banking sector on sound financial footing, despite rising asset quality pressures emanating from the impact of COVID-19
Johannesburg, 27 May 2021 – GCR Ratings (“GCR”) has published a research report reviewing the Rwandan Financial Institutions Sector. The report also provides GCR’s view on the sector risk score outlook.
The Rwandan banking sector appears to be on a sound financial footing, however rising asset quality pressure and a stressed government fiscal position, emanating from the adverse operating environment has led to a slight moderation in the GCR Financial Institutions Sector Risk Score.
In our opinion, asset quality is weakening, with non-performing loans increasing to 6.6% at 31 March 2021 and the cost of risk reaching a five year high of 3.6% in 2020. Furthermore, we estimate restructured lending to be around 20% of total loans.
The average capitalisation of the banks reduced to a 3 year low of 20.3%, at 31 Dec 2020, but remains solid supported by moderately strong earnings.
Funding structure is somewhat reliant on the interbank market. However, liquidity, both in local and foreign currency, appears to be adequate despite loans to deposits creeping above 110% at 31 Dec 2020.
GCR will periodically provide insights on key sectors/industries across different territories in which various rated entities are domiciled, encompassing changes in the operating environment, performance trends and its view of the impact of an evolution in market dynamics on the credit risk profiles of rated entities in selected industries.
Group Head of Ratings
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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
GCR’s Country Risk Score Report, March 2021
GCR Financial Institution Sector Risk Scores, May 2021
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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