Fitch affirms Stanbic Bank Kenya rating with negative outlook

Philip Odera, Stanbic Bank Kenya Chief Executive. FILE PHOTO | NMG 

By BRIAN NGUGI

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Summary

• Fitch Ratings said the assessment was informed by a moderate probability of support from its parent owner, South Africa-based Standard Bank Group, which indirectly owns 60 per cent stake in the Nairobi-based lender.
• The Standard Bank Group has itself earned a BB+ rating with a stable outlook from Fitch.

Fitch Ratings has affirmed Stanbic Bank Kenya (SBK) long-term issuer default rating (IDR) at ‘BB-’, but with a negative outlook informed by potential downgrade of Kenya.

Fitch said the assessment was informed by a moderate probability of support from its parent owner, South Africa-based Standard Bank Group, which indirectly owns 60 per cent stake in the Nairobi-based lender.

The Standard Bank Group has itself earned a BB+ rating with a stable outlook from Fitch.

The agency said the negative outlook on SBK long-term issuer default ratings reflects the negative outlook on Kenya’s rating (at B+/Negative) and the possibility the country ceiling will also be revised down in the event the sovereign is downgraded.

“We view SBK as a strategically important subsidiary of SBG, despite it operating outside of the group’s home market of South Africa,” the statement said.

READ: CfC Stanbic loses top-tier bank classification to CBA

A “default rating” is the measure of an agency’s credit risk. Risk is defined by a company’s threat of becoming defunct or entering into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedures.

The ratings are calculated on a scale of 11 predictors, with Fitch relying on independent auditors, attorneys and other experts to produce IDRs.
SBK represents around 1.4 per cent of SBG’s assets.

It has a five per cent market share of banking assets in Kenya and is primarily a corporate bank. Fitch noted its asset quality is deteriorating due to weaker operating conditions, but SBK’s impaired loan ratio of 5 per cent remains below the sector average of 10 per cent.

“A downgrade of Kenya’s sovereign rating accompanied by a downward revision of the country ceiling would result in a downgrade of SBK’s long-term IDR and SR,” it said.