Ratings Firm Fitch has downgraded multilateral development bank African Export-Import Bank (Afreximbank), giving it a negative outlook in its latest outlook.
- •Fitch has cited ‘high’ credit risks (previously ‘moderate’) and ‘weak’ risk management policies (previously ‘moderate’) in the latest assessment issued on Wednesday.
- •The increased credit risk stems from the rise in the bank’s non-performing loans (NPLs) ratio as calculated by Fitch, which exceeded the 6% ‘high risk’ threshold outlined in Fitch’s criteria at end-2024.
- •The revision of risk management to ‘weak’ reflects low transparency in the reporting of loan performance relative to multilateral development bank peers, and that Fitch’s definition of NPLs differs from the bank’s approach, which makes use of flexibilities offered by IFRS 9.
“The Negative Outlook reflects the risk that the debt owed to Afreximbank by some of its sovereign borrowers might be included in the perimeter of these sovereigns’ debt re-structuring. This would put pressure on our assessment of the bank‘s policy importance and heighten the risk associated with its strategy,” the ratings firm said.
Based on its own criteria of loan performance, and publicly available information, Fitch considers the exposure to the Ghana sovereign (2.4% of loans) as non-performing after considering it as performing at the last review.
Combined with other exposures that Fitch considers as non-performing loans such as South Sudan and Zambia, the rating firm’s own calculations of Afreximbank’s NPLs ratio indicate that it closed 2024 at 7.1%, surpassing the 6% ‘high’ risk threshold.
In contrast, Afreximbank’s reported NPL ratio-which excludes the exposures to Ghana, Zambia and South Sudan-improved to 2.3% in 2024 (2023: 2.5%).