Moody’s Investors Service says an upward rating pressure on the Kenyan banks’ ratings is limited given the negative outlook.
The rating agency said in a statement on the latest ratings of 32 banks across 10 African countries: Angola, Democratic Republic of Congo, Egypt, Ghana, Kenya, Morocco, Nigeria, Tanzania, Tunisia and Uganda.
In Kenya, the banks that were focused on include Co-operative Bank of Kenya Limited, Equity Bank (Kenya) Limited, and KCB Bank Kenya Limited.
The banks’ outlook could change back to stable if the sovereign rating outlook is changed back to stable, Moodys said in a statement.
However, if it assesses that the country’s operating environment has not ‘significantly deteriorated’ and the bank’s metrics remain at least commensurate to similarly rated global peers.
“Kenyan banks’ ratings could be downgraded if the sovereign rating is downgraded… or if Moody’s expects Kenya’s operating environment to weaken or if the banks’ financial metrics weaken materially, beyond the thresholds assumed by the current rating level.”
In April, Moodys said Equity Bank faced the greatest challenge on lending to small and medium-sized enterprises because 59% of its loan book was exposed to SME lending as of the end of December 2019’, Co-operative Bank at 6 per cent and KCB Group at four per cent.