Nigerian, S/African Banks To Face Challenges–Moody`s

***Rating Agency Changes 2020 Outlook For African Banks to
Negative 
Bayo Akinloye
The 2020 outlook for African banks has changed to negative from
stable, reflecting their weakening operating environment, Moody’s
Investors Service said in a report published today.
According to the topmost rating agency, the outlook for African banks
in 2020 is negative due to weakening operating conditions and rising
asset quality pressures banks will maintain high exposures to their
respective sovereigns, linking their credit profiles to those of their
governments.
The global economy remains sluggish with negative business sentiment
and trade uncertainty clouding growth prospects.
In Africa, government debt is high and GDP growth will remain below
potential and insufficient to boost per capital income levels or
increase economic resilience.
Moody’s changed its 2020 outlook for African banks to negative from
stable as the banking systems suffer due to the weakening environment
of the countries in which they operate.
“Weakening operating conditions are pressuring governments’ credit
quality leading to a knock-on effect on banks through reduced business
generation, slower credit growth, and rising asset risk,” said
Constantinos Kypreos, Senior Vice President at Moody’s.
Asset risk will remain high, a result of rising government arrears,
high loan concentrations, borrower-friendly legal frameworks, and
still evolving risk management and supervision capabilities.
Importantly, banks will maintain high exposures to their respective
sovereigns, which links and caps their credit profiles to those of
their governments.
“However, most rated African banks maintain high capital levels, and
funding and liquidity in local currency will remain solid in most
countries. Regional variations remain: banks in South Africa, Nigeria,
Tunisia, and Angola will face the greatest challenges; Egyptian,
Moroccan, Mauritian and Kenyan banks will be more resilient,” Moody’s
said in a statement today.

Post Author: Tayo Olanipekun