Kampala – Uganda April 26, 2022: Fitch, the international credit rating agency, has confirmed Stanbic Bank Uganda Limited’s (SBU) Long-Term Issuer Default (IDR) rating at ‘B+’ with ‘AAA’ being the highest possible rating while ‘D’ is the lowest.
SBU is Uganda’s largest bank, accounting for 22% of banking sector assets at the end of December 2021.
Its main national franchise is supported by a strong corporate and investment banking (CIB) business, relationships with major companies operating in Uganda, and other advantages derived from membership of the Standard Bank Group (SBG), which is Africa’s largest lender by assets.
Fitch regularly generates IDRs for a range of industries. An “issuer” can be a financial or non-financial company, a sovereign company or an insurance company. A “default rating” is an institution’s measure of credit risk.
Risk is defined by the threat of a business going out of business or going into bankruptcy, administration, receivership, liquidation, or other formal winding-up proceedings. Fitch relies on independent auditors and other experts to produce the IDRs.
According to Fitch, SBU’s national ratings reflect its creditworthiness relative to other issuers in Uganda. SBU’s national long-term ‘AAA (uga)’ rating is the highest possible nationally in Uganda and takes into account the potential support available from SBG.
SBU’s long-term IDR is one notch below that of SBG, reflecting SBU’s strategically important role in the group’s regional operations.
Fitch says SBU’s regulatory capital ratios have healthy cushions above the new minimum requirements. “The stable outlook reflects our view that SBU’s creditworthiness relative to other domestic issuers is not expected to change over a one to two year period.
SBU’s profitability is expected to recover further in 2022 due to a likely rise in interest rates in Uganda and stronger loan growth.
“We welcome Fitch’s positive rating which is a testament to the stability of our business and our ability to support Uganda’s economic growth in a challenging operating environment,” said Anne Juuko, Managing Director of Stanbic Bank.
However, Fitch warns that this projection could be partially offset by an increase in non-performing loan write-offs and the expiration of debt relief measures first announced by the Bank of Uganda in 2020 to help mitigate the crisis. impact of the Covid-19 pandemic. for both borrowers and banks.
Loans under repayment moratoriums, mainly in the real estate, education and industrial sectors, increased to 8% of gross loans at the end of 2021 and could put pressure on asset quality when the remaining credit relief measures expire at the end of September 2022.
Another factor is the effects of the Russian-Ukrainian conflict and lingering pandemic risks which could negatively impact economic recovery given Uganda’s small, undiversified economy, low immunization rates and reliance on imported oil.
However, the Bank’s funding profile, Fitch noted, is dominated by current accounts and savings accounts (end 2021: 96% of deposits), supporting an inexpensive and stable deposit base. SBU’s balance sheet is structurally liquid, which helps to mitigate the high concentration of single depositors.