Stanbic operations rated top class

BY BUSINESS REPORTER

STANBIC Bank Zimbabwe has been awarded top class rating for its operating performance across the board by Africa’s leading credit rating agency, GCR Rating (GCR).

GCR said Stanbic had a solid and stable outlook, with a resilient financial profile.

It said Stanbic Bank’s affirmation as a top performer was underpinned by its strong competitive positioning, healthy capitalisation, relatively stable funding structure and adequate liquidity.

“The ratings are complemented by implicit/explicit group support from the bank’s parent, Standard Bank Group Limited SBGL). The outlook is restrained by the hyperinflationary environment, adverse unquantified ramifications of the on-going COVID-19 pandemic and monetary policy inconsistency,” GCR said in the statement.

“GCR positively notes Stanbic’s classification as a domestic systemically important bank. The bank’s operations are restricted to Zimbabwe given its position within the broader SBGL. Revenue stability is good and in line with top tiers.”

It acknowledged that Stanbic enjoyed a “demonstrated track record” of consistently sound revenue generation, in line with top-tier
norms.

GCR took into account the risk of value erosion of the monetary assets and capital as a result of hyperinflation and exchange rate devaluation, balancing the bank’s value preservation strategies supported by a significant foreign currency balance sheet.

“Notable contribution towards capital growth continues to come from non-interest income primarily foreign exchange. We expect pressure on profitability to persist balancing the impact of hyperinflation on the net monetary asset balance sheet offset by growth in foreign currency income. Given the adverse operating conditions, reserve coverage was adequate,” it said.

GCR said Stanbic’s credit losses of 3% at December 2020 were within top tier industry range but this mostly reflected stage two transitions from the weak operating environment.

Stanbic has a very low stage three or gross non-performing loan ratio of below 0,1%.

However, this strength is partially offset by moderately high single name concentrations (top 20 was 41% of gross advances in March 2021) and a high proportion of unsecured lending (over 90%).

GCR noted that the bank had maintained a loan portfolio of good quality, exhibiting low delinquencies over the review period, supported by stringent underwriting standards and rigorous post-disbursement monitoring, despite a highly volatile operating environment.

“That said, there is some credit risk due to impact of harsh operating conditions and COVID-19 on affected borrowers. Foreign exchange risk is moderate, in the local context, the exchange rate has been stable since Q42020 and Stanbic ran a currency net open position, to the equivalent of 19% of shareholder funds in Q12021.”

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