Africa’s Regional Banks Need To Reduce Bad Loans – Moody’s

Africa’s Regional Banks Need To Reduce Bad Loans – Moody’s

From Business Daily

Regional and pan-African banks could lend more if they reduced their stock of bad loans and got additional funding from shareholders.

Ratings agency Moody’s said that these two factors were limiting the ability of African Export-Import Bank (Afreximbank), East African Development Bank (EADB), PTA Bank and Shelter-Afrique to lend more.

“Weak asset quality and a history of significant non-performing loans (NPLs) offset their robust capital position,” said Moody’s Africa Sovereign ratings team manager Matt Robinson.

Moody’s said that the four multilateral development banks (MDB) have in the past had a large number of bad loans in their books but added that they have managed to reduce their NPLs to single digits from double-digit levels over the last seven years.

“However, the four banks have improved their ratios of NPLs in recent years, partly due to restructuring and more robust risk management. For example, PTA Bank’s NPLs have fallen from 17 per cent of total loans in 2007 to 4.4 per cent in 2013. EADB’s restructuring has seen its NPLs ratio fall to 1.6 per cent in2013 from a peak of more than 30 per cent in 2010,” said Moody’s.

Moody’s said that Afreximbank was the exception with NPLs averaging 1.8 per cent of total loans over the same period. The bank is planning to raise $400 million (Sh36.44 billion) over the next two years after raising $107.5 million (Sh9.79 billion) in late 2014.

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