Fitch Downgrades Afreximbank: Gives Negative Outlook

(3 Minutes Read)

The revision of risk management to ‘weak’ reflects low transparency in the reporting of loan performance relative to multilateral development bank peers, and that Fitch’s definition of NPLs differs from the bank’s approach, which makes use of flexibilities offered by IFRS 9. 

Fitch has downgraded African Export-Import Bank (Afreximbank), giving it a negative outlook in its latest report. Fitch has cited ‘high’ credit risks (previously ‘moderate’) and ‘weak’ risk management policies (previously ‘moderate’) in the latest assessment issued recently. The increased credit risk stems from the rise in the bank’s non-performing loans (NPLs) ratio as calculated by Fitch, which exceeded the 6% ‘high risk’ threshold outlined in Fitch’s criteria at end-2024.

The revision of risk management to ‘weak’ reflects low transparency in the reporting of loan performance relative to multilateral development bank peers, and that Fitch’s definition of NPLs differs from the bank’s approach, which makes use of flexibilities offered by IFRS 9.

Based on its criteria of loan performance and publicly available information, Fitch considers the exposure to the Ghana sovereign (2.4% of loans) as non-performing, considering it as performing at the last review.

Combined with other exposures that Fitch considers as non-performing loans, such as South Sudan and Zambia, the rating firm’s calculations of Afreximbank’s NPL ratio indicate that it closed 2024 at 7.1%, surpassing the 6% ‘high’ risk threshold.

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In contrast, Afreximbank’s reported NPL ratio-which excludes the exposures to Ghana, Zambia, and South Sudan-improved to 2.3% in 2024 (2023: 2.5%).