Moody’s report reveals outlook for African banks turns negative in 2020

According to Moody's Investors Service's published report, the 2020 outlook for African banks has altered to negative from stable, reflecting their weakening operating environment. The global economy remains sluggish with negative business sentiment and trade uncertainty clouding growth prospects.

The government debt is high and gross domestic product (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," the Senior Vice President at Moody's, Constantinos Kypreos opined in a statement.

According to the rating agency, 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, APA news noted.

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, noted Moody's.

Banks in South Africa, Nigeria, Tunisia and Angola will face the greatest challenges; Egyptian, Moroccan, Mauritian and Kenyan banks will be more resilient, noted the statement.