Moody’s Investors Service has reaffirmed the East African Development Bank’s (EADB) Baa3/Stable rating, citing the bank’s strong capital foundation, improved non-performing assets ratio, and robust liquidity levels as key factors driving the rating. The affirmation solidifies EADB’s status as the highest-rated financial institution in the East African region, reinforcing its position as a critical financier for development projects across member states.
Key Highlights of Moody’s Rating Affirmation:
- Low Leverage and Strong Liquidity: Moody’s acknowledged that EADB’s leverage remains one of the lowest among its regional peers, positioning the bank advantageously in the market. This strong leverage profile, combined with significant improvements in liquidity, reflects the bank’s robust capital structure. EADB recently transferred its cash and term deposits from unrated banks to highly rated offshore banks, boosting its liquidity profile.
- Improved Non-Performing Assets (NPA) Ratio: EADB reported a commendable reduction in its non-performing assets (NPAs) ratio to 0.8% as of year-end 2023. This improvement, compared to its peers, signals effective risk management and portfolio quality. The stable asset quality and focus on high-quality credit lines from multilateral development banks (MDBs) ensure a steady and cost-effective source of funding for EADB’s developmental projects.
- Prudent Lending Strategy and Risk Management: Moody’s lauded EADB’s commitment to adopting a cautious approach to new lending under its upcoming 2024-2028 strategy. The rating agency anticipates that the bank will continue refining its risk management framework to maintain its capital adequacy and liquidity levels. The stable outlook suggests a balanced view of both positive and negative risks. Notably, a potential future upgrade could be supported by growth in loan issuance and reduced credit concentration risks.
Director General’s Remarks:
EADB’s Director General, Vivienne Yeda, expressed pride in the institution’s rating affirmation, noting its significance in mobilizing cost-effective financing to support development projects across the region. “For over 50 years, the bank has supported robust growth and transformation in the region. We are proud that Moody’s has affirmed our investment-grade rating as the highest-rated institution in East Africa,” Yeda stated.
Focus Areas and Vision:
Established in 1967 under the East African Cooperation Treaty, EADB was re-established in 1980 with an expanded mandate to promote social and economic development across its member states—Kenya, Uganda, Tanzania, and Rwanda. The bank’s strategic focus areas include financing projects in renewable energy, climate resilience, infrastructure, agriculture, agribusiness, tourism, and environmental conservation.
EADB’s emphasis on small and medium-sized enterprises (SMEs) financing is critical, as these businesses are the backbone of East African economies. The bank continues to provide tailored financial solutions to SMEs, encouraging growth, employment creation, and regional integration.
Conclusion:
EADB’s reaffirmation of its Baa3/Stable rating by Moody’s is a testament to its strong capital and liquidity management. As the bank prepares to execute its new strategic plan for 2024-2028, its commitment to prudent lending, improving risk management, and reducing concentration risks positions it well to foster inclusive and sustainable development in the region.
