Rating Action: Moody’s upgrades Banque Commerciale du Congo S.A.’s long-term deposit ratings to Caa1 from Caa2; changes outlook to stable from positive
Rating action follows completion of Equity Group Holdings’ acquisition of majority stake in BCDC
London, 21 August 2020 — Moody’s Investors Service ("Moody’s") has today upgraded the long-term deposit ratings of Banque Commerciale du Congo S.A. (BCDC) to Caa1 from Caa2. Moody’s has changed the outlook to stable from positive on the bank’s long-term deposit ratings.
At the same time, Moody’s has affirmed the bank’s Baseline Credit Assessment (BCA) at caa2, and upgraded the adjusted BCA to caa1 from caa2.
This rating action follows Equity Group Holdings Plc (EGH)’s public announcement on 11 August 2020 that EGH has completed the acquisition of a 66.53% stake in BCDC. Kenya-based EGH, a holding company with shares in various subsidiaries including Kenya-based Equity Bank (Kenya) Limited (B3 negative, b2) and Democratic Republic of Congo (DRC)-based Equity Bank Congo S.A. (EBC), plans to combine BCDC with EBC.
BCDC, established in 1909, is a DRC-based bank with reported total assets of $1.2 billion as of 31 December 2019.
A list of affected ratings is provided at the end of this press release.
RATINGS RATIONALE
— UPGRADE OF ADJUSTED BCA AND DEPOSIT RATING REFLECTS HIGH PROBABILITY OF AFFILIATE SUPPORT IN CASE OF NEED
The upgrade of BCDC’s long-term deposit rating to Caa1 from Caa2 reflects the affirmation of the bank’s caa2 BCA and the upgrade of the bank’s adjusted BCA to caa1 from caa2, following the incorporation of one notch of affiliate support uplift from EGH.
AFFIRMATION OF BCAThe affirmation of BCDC’s caa2 BCA reflects the bank’s strong and established corporate banking franchise, which drives solid profitability (1.2% net income/tangible banking assets in 2019). BCDC also has sound deposit-based funding and low market funding reliance (4.7% market funds to tangible banking assets), combined with high liquid resources (59% liquid banking assets to tangible banking assets ratio). Furthermore, the affirmation also captures the bank’s strong management, which has supported the bank’s performance over a sustained period in a volatile operating environment.These strengths are balanced against the very difficult operating environment in the DRC, which significantly constrains BCDC’s credit profile. In addition, Moody’s expects that the coronavirus pandemic will hurt economic growth in the country, and increase the risk of problem loan formation. The bank’s high problem loans (6.2% problem loans to gross loans ratio) and concentrated loan book constrain its asset quality, while the […]