Fitch affirms Afreximbank’s BBB- credit rating with stable outlook

Fitch Ratings, an American credit rating agency, has affirmed African Export-Import Bank (Afreximbank)’s long-term Issuer Default Ratings (IDR) at ‘BBB-‘ with a stable outlook, the Bank said on Thursday.

The agency also affirmed the Bank’s Short-Term IDR at ‘F3’ and senior unsecured debt at ‘BBB-‘.

Fitch highlighted that Afreximbank’s ‘BBB-‘ rating is driven by its intrinsic features, including solvency and liquidity, and adding that the ongoing and expected capital increases support the resilience of the bank’s solvency during the COVID-19 pandemic.

The agency noted that “the strong capitalization is underpinned by the equity to assets guarantees ratio at 18.1 percent in 2019, close to 2018 level (18.5%) as the bank’s expansion has been broadly matched by paid-in capital payments from the ongoing US$1 billion capital increase (targeted to be completed by end-2021, 91 percent had been raised by end-H1 2020) and internal capital generation”. Fitch further noted that a high level of loan collateralization (88% of the facilities), credit insurances from ‘A’ rated insurers, and hedging strategies on commodity-backed facilities, have all helped the Bank maintain a low impairment ratio of 2.4 percent on a 10-year average, “despite its ‘high’ risk operating environment.”

Fitch observes that the Bureau of African Union Heads of States and Governments recently endorsed a significant increase to Afreximbank’s subscribed capital, which will further support the resilience of the Bank’s solvency amid COVID-19 related pressures on asset quality. The agency expressed the view that Afreximbank’s PATIMFA facility, which is supporting African nations during the pandemic, will incentivize sovereigns to remain current on loan repayments with the Bank.

Benedict Oramah, President of Afreximbank, said, “Afreximbank is pleased to receive this positive affirmation from Fitch and we have full confidence in our resilience during the COVID-19 pandemic. Through strong liquidity and robust risk management, we have ensured that we have the solid foundation needed to support Africa’s post-pandemic recovery and the continued expansion of intra-African trade. Our strategic response to COVID-19, and the implementation of the African Continental Free Trade Agreement, will only strengthen our position, reinforcing our role as a key driver of the continent’s economic development.”