Global firm Moody’s gives Equity Bank strong rating

Local lender Equity Bank has the highest credit rating score of all Kenyan banks, says international rating agency Moody’s Investors Service.

The global agency which assigns credit scores to companies, governments and municipalities based on their financial strength, gave Equity Bank a stable rating due to digital and agency banking initiatives that the lender has undertaken, that have in turn boosted profitability.

“Moody’s therefore expects that Equity Bank’s profitability metrics will remain strong, supported by its low cost funding, an increasing proportion of non-interest income, and an efficient cost structure with the extensive use of digital and alternative distribution channels,” said Moody’s in a release.

Equity Bank, on its part, said that the lender will continue with these strategies that are meant to make it navigate the tough lending environment.

“The rating reflects the bank’s intrinsic credit strength, significant market size, acceptable risk management practices, profitable business model, prudent capital levels and support from its shareholders.

We continue to protect ourselves against slow business volumes by focusing on high margin plays and cutting on operational and funding costs,” Equity Group chief executive officer James Mwangi said in a statement.

Moody’s uses a rating scale that ranges from a high of Aaa to a low of C. The ratings provide investors with a system of grading by which to assess the creditworthiness of securities of a company or institution. Pension and other asset management firms are some of the investors that rely on credit rating scores to make investment decisions such as buying a company’s stock or investing in corporate bonds.

Kenya Commercial Bank, Co-operative Bank are other Kenyan lenders that have been issued with credit ratings.

Other Kenyan companies that have been assigned ratings include Associated Steel Limited which recently received a stable rating from Global Credit Ratings of South Africa.

The credit worthiness of B1 means Equity Bank has capacity to meet its financial commitments.

However, adverse business, financial, or economic conditions are likely to impair its willingness to meet its financial commitments.

The highest grade of Aaa means extremely strong financial muscle while the least grade of C shows that the economy or firm is in default, hence very risky for investors.

The global credit rating agency has also assigned the bank Counterparty Risk Assessments of Ba3, global foreign-currency deposit ratings of B2 and b1 baseline credit assessments.

Locally, the bank has been assigned deposit ratings of Aa1 with a positive long term global deposit outlook, making it the best in the country.

Kenya Commercial Bank and Co-op Bank are ranked Aa2 on the Kenya national scale.

Moody’s expects the bank’s profitability metrics to remain strong, supported by its low cost funding, an increasing proportion of non-interest income, and an efficient cost structure.

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