Clean bill of health for Afreximbank

Fitch Ratings has given the African Export-Import Bank (Afreximbank) a clean bill of health, saying their finances are on sound footing.

The rating agency says Afreximbank’s rating moved from an A rating at ‘BBB’.

The ratings affirmation recognises Afreximbank’s strong profile and increasing systemic relevance to the African continent, as evidenced by the increasing number of key mandates placed on the bank by the African Union (AU), including the implementation of the health response to the Covid-19 pandemic and, recently, the support for access to grains and fertilisers in the context of the Russia-Ukraine war.

Fitch also acknowledged the bank’s strong capitalisation and liquidity position, evidenced by its ‘excellent’ internal capital generation, where the bank was benefiting from ongoing shareholder support through the AU-initiated General Capital Increase (GCI), under the bank’s current strategic plan, through which the bank aims to raise US$2,6 billion in paid-in capital.

Cumulatively, the bank has mobilised a gross paid-in equity of US$2,1 billion since the GCI was launched in August 2021.

Fitch noted that Afreximbank had a strong liquidity profile, with its share of quality treasury assets rated ‘AA’ to ‘AAA” (53% in 2023) remaining substantially above the ‘strong’ threshold of 40%.

The liquidity profile is further enhanced by its access to capital markets and other alternative liquidity sources even during challenging times.

Afreximbank has continuously demonstrated its ability to de-risk its lending portfolio, with a low concentration risk and a high degree of loan collateralisation (85% of total loans in 2023, including provisions), with cash collateral covering 20% of the loans and eight percent covered by credit insurance from ‘A’ to ‘AA’-rated insurers.

Fitch assessed the bank’s risk management policies as ‘moderate’ and primarily reflected “the bank’s use of credit risk mitigants that have helped maintain a relatively low non-performing loan ratio, despite the high-risk environment that the bank operates in”.

Reacting to the reaffirmation of the bank’s rating, Denys Denya, Afreximbank group senior executive vice president, said it was pleasing to note that Fitch rates the bank “a-” on a standalone basis, before notching two levels down due to operating environment; which is a strong testament to the bank’s systemic relevance to Africa and a recognition of its strong delivery of its developmental mandate, its prudent risk management practices and its relentless focus on capital and liquidity which had culminated in robust financial performance.

“The bank and its subsidiaries continue to play a pivotal role in facilitating trade and investment across its member states,” said Denya.

“Together with the robust relationships it enjoys, the bank has become integral to the achievement of the AU’s key strategic economic programmes and initiatives on the continent and in the diaspora, including the implementation of the African Continental Free Trade Agreement (AfCFTA) and the management of the AfCFTA Adjustment Fund.”

He further noted that in executing its countercyclical role, Afreximbank continues to be nimble and resourceful in its support to member states to enable them to mitigate the vagaries of a persistently challenging operating environment, such as the 2015 commodity price crisis, the Covid-19 pandemic, the Ukraine-Russia crisis and the current African debt crisis. The bank is grateful for the support of the AU and its member countries in its capital and deposit mobilisation drive.