Home BUSINESS African Development Bank secures Fitch’s AAA rating

African Development Bank secures Fitch’s AAA rating Updated for 2021


Updated: February 24, 2021

WASHINGTON – Fitch’s rating of the African Development Bank published on July 24 in London is affirmed as AAA.

Fitch Ratings is one of the leading global providers of credit ratings, commentary and research. The agency upgraded the intrinsic assessment to ‘aa’ from the previous ‘aa’- driven by an improvement in Fitch’s assessment of the Bank’s business environment.

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The rating provides a significant boost for the Bank at a time it is discussing a substantial general capital increase to finance its strategy and activities over the next few years.

The Bank’s ‘aaa’ support from its shareholders was based on Fitch’s forecasts that the Bank’s net debt will be fully covered by callable capital from ‘AAA’ rated member countries by 2021.

The projection assumes shareholder approval of an increase in subscribed capital from 2020, and lending growth averaging 7% year on year in 2019-2021.

Other key points from the Fitch rating include the following:

The Bank’s solvency assessment of ‘aa’ primarily reflects its ‘strong’ capitalisation.

The equity to asset and guarantees ratio remains within the ‘strong’ range.

Fitch’s usable capital to risk-weighted assets (FRA) ratio, newly introduced, was just below the threshold for an ‘excellent’ assessment (35%) at end-2018 and is likely to be ‘excellent’ in 2019.

Overall risk is rated as ‘low’, with risk management policies seen as conservative and assessed as ‘excellent’.

Concentration risk is considered ‘low’ and has benefited from the Exchange Exposure Agreement with other development finance organisations.

Equity participation is expected to remain below 5% of the banking portfolio by 2021, in line with the internal limit of 15% of risk capital.

FX and interest rate risks are very limited and conservatively managed.

The liquidity assessment is ‘aaa’ and the quality of liquid assets is ‘excellent’.

The Bank’s business environment now translates into no negative adjustment (from a one notch negative adjustment previously) to the improved intrinsic rating, which reflects a stronger assessment of the bank’s strategy to ‘medium’ risk from ‘high’ risk.

The Bank’s outlook is rated as Stable.

As the Fitch rating states, the process for a General Capital Increase (GCI-VII) is expected to be completed by end-2019, including a final agreement on its amount.

The President of the African Development Bank, Akinwumi Adesina welcomed the assessment and said, “I am delighted by the affirmation of the AAA rating as well as the accompanying explanations, which clearly explain the solid and comprehensive reasons for the overall improvements in the intrinsic rating, as well as the ‘extraordinary support’ we receive from our shareholders. It is a massive boost for the Bank to be encouraged so strongly in the year of the General Capital Increase and with so much hard evidence provided.”

He added that “It is also a tribute to all our stakeholders, partners, and those who have been working at and with the Bank during this past year. Fitch’s rating is not just about our credit; it speaks volumes for the Bank’s solid achievements, consistent strategy, development impact, leadership, and overall direction.”


Today News Africa
Today News Africahttps://todaynewsafrica.com
Today News Africa is a US-based international news organization focused on US-Africa policy and breaking news. Our goal is to provide truthful and exclusive stories to a diverse audience across North America and the African Continent. Subscribe to our news page at https://todaynewsafrica.com/ and Follow us on Twitter @todaynewsafrica


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