The Global Credit Rating Company (GCR) has upheld last year’s ABC Bank upgraded rating of national scale short term A2 (KE) and long term BBB (KE) with the outlook accorded as Stable.
An A2 rating, according to Fitch Ratings, is a very high credit quality rating and denotes expectations of very low default risk. It indicates a very strong capacity for payment of financial commitments not significantly vulnerable to foreseeable events. On the other hand, a ‘BBB’ rating is good credit quality and indicates default risk is currently low, with adequate capacity for payment of financial commitments.
The favourable rating comes on the back of the bank’s improved capitalization, enhanced risk management process, sufficient liquidity buffers and moderate earnings profile. Other factors leading to the rating include the bank’s focus on its leading position in providing affordable trade and asset financing products to the vibrant SME and corporate segments, as well as its expansion of client portfolio to include all market segments. The bank has in the last couple of years made a concerted effort to tap in to the local and international remittances segment even as inflows from the Diaspora community continue to increase.
“We are energized by the positive rating. It positions us as having safe and sound financial health backed by our capital raising efforts through the private bond issue last year’’, noted ABC Bank Group Managing Director Shamaz Savani.
The bank issued a Ksh.1 billion private bond in May 2014 to raise additional capital following revised Central Bank of Kenya prudential guidelines in 2013 requiring banks to maintain a higher capital conservation buffer. The issue was oversubscribed by 57 percent following huge investor enthusiasm. As a result of the cash call, ABC Bank grew its total regulatory capital by 57.2 per cent from 2013 to Ksh. 2.9 billion in 2014, driven by an increase in retained earnings.
In spite of a higher absorption of funds to support lending to SME and corporate clients, the bank’s liquidity ratio has remained solid and in line with the regulatory requirements. The bank also took a strategic decision to maintain the liquidity ratio at a low of 25 percent and a high of 32 percent to optimize fund utilization and grow the loan portfolio.
Savani added: “The positive rating status is a reflection of the deliberate steps we have taken in effecting positive operational changes in the business, including the enhanced funding profile and positive internal growth. We have appropriately deployed funding, improved profitability while maintaining credit protection factors and diversified our income streams.”
In an effort to bolster its delivery channels, ABC Bank has invested in innovation to increase its customer touch points. It has partnered with 15 Saccos across the country to provide current accounts and trade finance facilities to their members. It also entered in to an agency banking agreement with Postbank last year to support its retail outreach strategy.
ABC Bank’s strength is also anchored on its market diversification through its subsidiaries- Nairobi-based stock brokerage ABC Capital, ABC Insurance Brokers and ABC Capital Bank-Uganda.
“Plans to roll out new branches in prime locations in Nairobi are at an advanced stage. These will, besides expanding our presence, take our services closer to our increasingly growing clientele base as Nairobi continues to grow as a regional business hub,” Savani hinted.
