Afreximbank rejects Fitch’s negative rating, clarifies debt restructuring

The African Export-Import Bank (Afreximbank) has rejected the recent assessment by global ratings agency Fitch, insisting that it is in a strong financial position. In a statement on Tuesday, the bank said its financial reporting adheres strictly to International Financial Reporting Standards (IFRS), including IFRS 9, which governs how non-performing loans (NPLs) are classified. It […]

The African Export-Import Bank (Afreximbank) has rejected the recent assessment by global ratings agency Fitch, insisting that it is in a strong financial position.

In a statement on Tuesday, the bank said its financial reporting adheres strictly to International Financial Reporting Standards (IFRS), including IFRS 9, which governs how non-performing loans (NPLs) are classified.

It would be recalled that on June 4, Fitch downgraded Afreximbank’s credit or long-term issuer default rating (IDR) to ‘BBB-‘ from ‘BBB’ with the outlook accorded as negative.

In the rating note, Fitch also downgraded Afreximbank’s Short-Term IDR to ‘F3’ from ‘F2’ and the long-term ratings on the bank’s Global Medium-Term Note Programme and debt issuances to ‘BBB-‘ from ‘BBB’.

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According to the rating note, the downgrade of Afreximbank’s ratings reflects the downward revision of Fitch’s solvency assessment from ‘a-‘ to ‘bbb+’. This principally reflects the issuer’s ‘high’ credit risks, worsened from ‘moderate’ and ‘weak’ risk management policies.

The increased credit risk stems from the rise in the bank’s non-performing loans (NPLs) ratio as calculated by Fitch, which exceeded the 6% ‘high risk’ threshold outlined in Fitch’s criteria at the end of 2024.

Fitch said the revision of risk management to ‘weak’ reflects low transparency in the recent reporting of loan performance relative to multilateral development bank peers and that Fitch’s definition of NPLs differs from the bank’s approach, which makes use of flexibilities offered by IFRS 9.

 

‘Erroneous rating’

However, the pan-African multilateral financial institution described the ratings as “erroneous,” saying it does not participate in debt restructuring negotiations for any member country.

“Fitch’s ‘negative outlook’ decision, which it says reflects ‘the risk that the debt owed to Afreximbank by some of its sovereign borrowers may be restructured’, is hinged on the erroneous view, in some quarters, that the treaty establishing Afreximbank, executed by its 53 participating African states, can be violated by the Bank without consequences,” the bank said.

“For clarity, the Bank establishment agreement is a treaty entered into by, and among, all participating states and between the participating states and the Bank.

“Accordingly, Afreximbank would like to reaffirm that it is not participating in debt restructuring negotiations related to any of its member countries. To do so would be inconsistent with the Bank establishment treaty.

“The treatment of its loans and other activities is governed by the treaty and not by classifications created outside its framework.

“The Bank’s application of IFRS 9 is comprehensively detailed in its 2024 Financial Statements and further clarified in the external auditors’ report. Fitch’s definition of NPLs differs from the Bank’s approach, which makes use of forward-looking information.”

Despite the negative outlook, Afreximbank noted that Fitch pointed at several positive indicators of the bank’s strong financial position, including strong capitalisation, low concentration risk and a high quality of treasury assets that “support a strong liquidity assessment”.

“Afreximbank’s financial resilience, robust governance and unwavering commitment to excellence, and to Africa, are critical to the delivery of its mandate,” the lender added.

The bank reiterated its commitment to supporting African economies through trade-led growth and macroeconomic stability, especially in a challenging global environment.