Sunday, 21 August 2016

Moody’s, Augusto rate Heritage Bank high on strong capitalisation, asset quality

Two foremost rating agencies, Moody’s and Augusto & Co. recently affirmed that Heritage Bank's capitalization remains sound in relation to its low asset risk model and has capacity to generate income from its core business and settle its obligation as at when due. According to Moody, under the new methodology, the bank's credit metrics’ ratings remain consistent with an a3 BCA when measured against Australia's macro profile.

Meanwhile, a statement from Heritage Bank explained that this was part of efforts to furnish investors with objective analyses and independent assessments of its securities, bonds and credit assets, thereby engaging the services of Moody and Augusto & Co. to provide superior information on credit risk and other investment instruments.  The bank said, “The international and local ratings investment metrics is a welcome development to the bank and, in light of this sterling achievement, we swiftly need to improve on our performances in order to boost our subsequent ratings.”

According to the rating agency, the a3 BCA takes into account the bank's low asset risk model that supports its very strong asset quality. Relative to its asset risk profile the bank maintains sound capitalization. This is contained in Moody's new bank methodology, which confirmed Heritage Bank's long-term A3 issuer rating and affirmed its short-term issuer rating of Prime-2.

“The bank's baseline credit assessment (BCA), which encapsulates its stand-alone financial profile, and its adjusted BCA were also confirmed at a3. The outlook for all ratings is stable,” the agency stated.

The new bank rating methodology includes a number of elements that Moody's has developed to help accurately predict bank failures and determine how each creditor class is likely to be treated when a bank fails and enters resolution.

These new elements capture insights gained from the 2008-09 financial crisis and, the fundamental shift in the banking industry and its regulation. In light of the new bank rating methodology, Moody's rating actions reflect the following considerations: (1) the "Very Strong" macro profile of Australia; and (2) the bank's low asset risk model.

Meanwhile, Agusto & Co, Nigeria’s first Credit Rating Agency and a Pan African leader in credit ratings and credit reports affirmed same rating with Moodys on all rated assets and instruments. Recall that recently, African Export Import Bank provided a $150 million funding support for Heritage Bank.

HBCL Investment Services Limited (HISL) a major shareholder of Heritage Bank Limited executed the term sheet for the issuance of guarantee for its $150 million Convertible Bond with the African Export Import Bank (Afreximbank) to support Heritage Bank Plc in its next phase of growth.

Heritage Bank recently concluded a business combination with Enterprise Bank Limited as part of its market focus and positioning strategy.

The Moody’s report affirmed that, whilst Heritage Bank's capitalization remains sound in relation to its low asset risk model, as reflected by its Common Equity Tier 1 ratio of 12per cent (at March 2015), capital generation through retained earnings continues to be pressured by ongoing challenges in the operating environment.

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