Global ratings agency Moody’s has affirmed the East African Development Bank (EADB) Baa3 long-term issuer rating in a move likely to boost the lender’s chances of attracting funds from local and international lenders.
Moody’s cited “high capital position and strong liquidity,” balanced against a challenging operating environment, low asset quality and concentration risks that led to a recent rise in non-performing loans.
“The debt service coverage ratio (short-term debt and currently maturing long-term debt to discounted liquid assets) is one of the strongest ratios among our MDB rated universe, improving to 18.9 per cent in 2016 from 20.2 per cent in 2014,” it said.
The agency added that EADB’s long-term deposit ratings carry a stable outlook.
Moody’s rating scale runs from a high of Aaa to a low of C, comprising 21 notches that are divided into investment and speculative grades.
The purpose of Moody’s ratings is to provide investors with a simple system of grading by which to assess future relative creditworthiness of securities or an entity.
The EADB was restructured in 2011 following a litany of managerial and operational problems.
It has since mid-last year been embroiled in a bitter internal war pitting its unnamed employees against director-general Vivienne Apopo, who was accused of mismanaging the bank and running a lone-ranger operation.
Securities or entities that are rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk while those rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.
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