Standard & Poor's Ratings Services have today revised its outlook on African Export-Import Bank (Afreximbank) to negative from stable. At the same time, S&P affirmed the 'BBB-/A-3' long- and short-term issuer credit ratings on the bank. "The outlook revision reflects that Afreximbank has recently experienced rapid loan growth without significantly increasing fresh capital. It also follows the recent amendments to the bank's charter to allow for a new class of private-sector shares that can be listed on an exchange. We believe this could increase the bank's private-sector focus and therefore weaken the bank's ability to fulfill its public policy mandate." "The ratings on Afreximbank continue to reflect our assessment of the bank's business profile as "weak" and financial profile as "strong", as our criteria define these terms (see " ," published Nov. 26, 2012 , on RatingsDirect). The ratings also reflect the bank's 'bbb-' stand-alone credit profile (SACP). We do not attribute any rating uplift to Afreximbank's callable capital, given our view of its policy importance to its shareholders and, more importantly, given that we rate Afreximbank higher than most of its shareholders." "Under the bank's newly amended charter, shares are now divided into four classes. "Class A", 64 per cent of shares, is exclusively held by African governments or their designated institutions; "Class B", 26 per cent of shares, is held by private African companies; and "Class C", 10 per cent of shares, is held by international public enterprises and private companies. The newly added "Class D" has the potential to be listed on an exchange. Although a public listing would bring many benefits, we believe it would also change the nature of the institution and its incentive structure. Under our criteria, a listing of its shares would entail that we view Afreximbank as a commercial bank, and we would rate it under our financial institutions criteria. As of now, Afreximbank has not yet raised Class D capital and still maintains its MLI status." "The negative outlook reflects that we could lower the ratings if capital ratios fall either because Afreximbank does not raise fresh capital with new or existing shareholder governments or because loan risk-weighted asset growth outpaces internal capital generation. We could also lower the ratings on the bank if we thought it had taken on more commercial bank-like characteristics, given that its incentives would change when management needs to maximize profitability."
Most Popular Stories
- Obama Administration Releases Proposal to Regulate For-Profit Colleges
- Apple, HP, Intel May Take a Hit from Slowdown in Smartphone Sales Growth
- Elizabeth Vargas' Husband Marc Cohn Addresses Rumors
- Keurig Adds Peet's coffee, Alters Starbucks deal
- Motley Crue's Nikki Sixx Marries Model Courtney Bingham
- FDIC Files Lawsuit on Behalf of Banks Allegedly Hurt by Libor Scandal
- U.S. to Relinquish Gov't Control Over Internet
- Chinese e-Commerce Giant Alibaba Gears for IPO in U.S.
- Some California Cities Seeking Water Independence
- Will Missing Malaysian Jet Prompt Aviation System Change?