Moody's Investors Service has today assigned a first-time foreign and local currency issuer rating of Baa1 to the West African Development Bank (BOAD). The outlook on the rating is stable.
The key factors of BOAD's Baa1 rating are the following:
(1) Moody's low assessment of BOAD's capital adequacy, which is driven by weak borrower quality, and moderate levels of non-performing loans (NPLs), weighing on asset coverage and leverage levels that have been boosted thanks to a large infusion of equity from the bank's Energy Development Fund. The assessment also reflects risks associated with the bank's plan to expand non-concessional lending in the coming years.
(2) Moody's very high assessment of BOAD's liquidity which is primarily supported by BOAD's access to refinancing from the Central Bank of West African Countries (Banque Centrale des Etats d'Afrique de l'Ouest (BCEAO)).
(3) Moody's assessment of medium strength of member support balances the strong willingness of members to support the bank against their limited overall ability to do so. Shareholder ability to support is tempered by the shared exposure to systemic risks among BOAD's West Africa shareholders, and the correlation between shareholders and borrowers.
