In a rating action note dated 28 October 2021, Moody's said
the key factors underpinning the affirmation include robust capital buffers,
combined with superior risk management which contain the challenges associated
with low development asset credit quality amid a difficult operating
environment; very strong access to funding which supports the bank's ample
liquidity buffer; and very high support from regional and non-regional
shareholders to support the African Development Bank's development mandate.
"The stable outlook reflects Moody's expectations that
African Development Bank's capital and liquidity buffers will remain in line
with Aaa peers and that prudent risk management practices will maintain
nonperforming assets at low levels despite a challenging operating
environment," the note further said.
The outlook is also based on expectations that the Bank's
shareholders will continue to provide substantial support, through regular
capital increases, and when necessary, the provision of support beyond
contractual obligations.
The note also commented on the Bank's solid capital
position. "After several years of rising leverage, AfDB's leverage ratio
improved slightly to 295% in 2020, compared with 298% in 2019. This reflected a
combination of a slower pace of lending growth and the first contributions made
under the latest general capital increase, GCI VII, which was approved by
AfDB's board in 2019." Moody's expects further paid-in capital
contributions from shareholders to prevent a deterioration in leverage over the
next several years.
The bank's liquidity buffer is among the strongest within
the Aaa-rated peer group, with liquid assets covering 101% of net cash outflows
over an 18-month horizon.
"As one of the main conduits for private investment and
development goals on the African continent, Moody's views the ability and
willingness of AfDB's shareholders to provide support to be very high, which
provides uplift to the bank's intrinsic financial strength."
Non-regional member countries account for 40% of the Bank's
capital subscription, including a number of highly rated sovereigns like the
United States (Aaa, stable), Japan (A1, stable), Germany (Aaa, stable), Canada
(Aaa, stable) and France (Aa2, stable), highlighting the ability and willingness
of shareholders to support the African Development Bank's development
objectives.
Additionally, the African Development Bank's non-regional
shareholders have a track record of demonstrated support to the institution
beyond their ongoing contractual involvement, including a history of temporary
callable capital solutions to support the institution during particular
periods.
Commenting on the rating newly appointed Senior Vice
President of the African Development Bank Group, Bajabulile "Swazi"
Tshabalala said: "Moody's assessment reflects the financial strength of
the African Development Bank, an institution resolutely geared towards putting
Africa on a path to inclusive and sustainable growth."
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