Rating firm Moody’s has affirmed the East African Development Bank’s (EADB) credit score at Baa3 (medium grade) and maintained the stable outlook.
The rating affirmation reflects the EADB’s strong capital position, offset by low development asset credit quality and a legacy of high non-Performing assets (NPAs).
Liquidity and funding benefits from relatively robust liquidity levels but is marked by a less diverse funding structure than many rating peers.
Moody’s assessment of strength of member support balances a large cushion of callable capital with the limited ability of shareholders to provide support given the low ratings of the EADB’s four main shareholders – Kenya (B3 negative), Rwanda (B2 stable), Tanzania (B2 positive), and Uganda (B2 negative).
In a statement, the rating firm said, the stable outlook reflects a balance of upside and downside risks. “Notwithstanding the risks associated with a challenging operating environment and the elevated concentration of the EADB’s portfolio, the potential for capital erosion is mitigated by the Bank’s currently very low leverage ratio and cautious approach to new lending.”
Moody’s assumes that the bank will continue to develop its risk management framework, which is not as advanced as other rated peers, while maintaining robust capital adequacy, and prudent liquidity levels.