Moody’s Assigns Negative Outlook to African Banks in 2020

2020 outlook for African banks has changed to negative from stable, reflecting their weakening operating environment, Moody’s Investors Service stated in a report published yesterday.

The global rating agency noted that economies in the continent have remained sluggish with negative business sentiment and trade uncertainty clouding growth prospects.

According to a statement, in Africa, government debt is high, just as it predicted that Gross Domestic Product (GDP) growth in the region would remain below potential and insufficient to boost per capital income levels or increase economic resilience.

“Weakening operating conditions are pressuring governments’ credit quality leading to a knock-on effect on banks through reduced business generation, slower credit growth and rising asset risk,” Senior Vice President at Moody’s, Constantinos Kypreos said.

“Asset risk will remain high, a result of rising government arrears, high loan concentrations, borrower friendly legal frameworks, and still evolving risk management and supervision capabilities. Importantly, banks will maintain high exposures to their respective sovereigns, which links and caps their credit profiles to those of their governments.

“However, most rated African banks maintain high capital levels, and funding and liquidity in local currency will remain solid in most countries. Regional variations remain: banks in South Africa, Nigeria, Tunisia and Angola will face the greatest challenges; Egyptian, Moroccan, Mauritian and Kenyan banks will be more resilient,” it added.

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