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).
The Standard Bank Group’s subsidiary was affirmed national scale long-term issuer and short issuer ratings of AA(ZW)/ A1+(ZW) respectively and deemed to be having a solid and stable outlook.
GCR, which has established itself as the leading rating agency in Africa, accounting for the majority of all ratings accorded on the African continent, said in a statement that the affirmation reflected the bank’s resilient financial profile within a challenging operating environment.
The rating agency has a local presence in Mauritius, South Africa, Nigeria, Kenya and Zimbabwe, and has the largest rating team in Africa, giving it unmatched presence on the ground as well as easy access to market participants.
According to the agency, Stanbic Bank’s affirmation as a top performer was underpinned by its strong competitive positioning, healthy capitalisation, relatively stable funding structure and adequate liquidity.
“Furthermore, the ratings are complemented by implicit/explicit group support from the bank’s parent, Standard Bank Group Limited (“SBGL” or “the group”). The outlook is restrained by the hyper-inflationary environment, adverse unquantified ramifications of the on-going Covid-19 pandemic and monetary policy inconsistency,” said GCR.
Stanbic Bank’s business profile was rated positive on the back of its being one of the leading banks in Zimbabwe with a high market share across loans and deposits and a strong franchise within the local market.
The financial institution offers a diverse range of products in the local market, distributed through a well-established local franchise.
“GCR positively notes Stanbic’s classification as a domestic systemically important bank (“D-SIB”). 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,” said GCR.
It acknowledged that Stanbic enjoys a “demonstrated track record” of consistently sound revenue generation, in line with top tier norms.
GCR also 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.
In coming up with the ratings, GCR said it considered Stanbic Bank to be adequately capitalised, supported by a capital ratio of 19.8 percent at 31 December 2020.
One of the issues considered for the high rating for Stanbic Bank is its regulatory core capital, which is way above the December 2021 requirement of US$30m, as of May 2021, based on the prevailing interbank rate.
GCR said this was highly commendable given the pressures for exchange rate depreciation due to widening forex supply gap, which could exert pressure on maintaining the core capital above the US$30m threshold.
GCR said Stanbic’s credit losses of three percent at December 2020 were within top tier industry range but this mostly reflected stage two transitions from the weak operating environment.
Stanbic Bank was also positively rated for its funding and liquidity on the back of a relatively stable funding structure and adequate liquidity.
GCR said Stanbic Bank is exposed to the same structural funding as most banks in Zimbabwe, namely demand customer deposits (mostly corporate) and short-term maturity mismatches in its asset/liability profile.
“Therefore, the bank remains susceptible to external shocks, further exacerbated by the challenging operating environment. To manage liquidity risk, the bank holds high levels of liquidity mitigating structural funding risks,” said the agency.
GCR said Stanbic bank’s outlook is Stable, balancing its expectation that the financial services institution would maintain a sound financial profile supported by low asset quality risk, sound internal capital generation and adequate levels of liquidity against the turbulent operating environment.