Monday, December 09, 2019 / 2:42 PM / by Moody's Investors Service
/ Header Image Credit: EcoGraphics
- 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 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.
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.
"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.

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