Capital Intelligence (CI), the international credit rating agency, today announced that it has assigned a 'Negative' Outlook to Tunisia's Banque Nationale Agricole's (BNA) Foreign Currency ratings, as well as to its Financial Strength rating. Despite the improvement in asset quality and profitability, the rating action reflects the uncertain political situation and the attendant risks to economic and financial performance. BNA's Long and Short-Term Foreign Currency ratings were affirmed at 'BB+' and 'A3' respectively. The Financial Strength rating was also affirmed at 'B+', as was the Bank's Support rating of '2'.
BNA's asset quality has shown consistent improvement over the last few years, particularly through an increase in the loan-loss reserve coverage against non-performing loans (NPLs) and a fall in the gross level of NPLs. Nonetheless, NPLs remain high against gross loans and coverage is still considered low. Weak asset quality has led to low profitability due to the continued high provisioning charge. Profitability, however, improved to end-June 2010 through higher margins generated by a lower cost of funds. BNA still faces a number of challenges in enhancing its financial profile, particularly given the outlook for the economy in 2011.
The provision charge continues to consume a significant proportion of operating profit; this is likely to remain the situation over the next few years at least. Liquidity is tight, mainly due to the fact that loans form a high percentage of total assets. Capital is adequate but only just so as the position is eroded by the shortfall in provisions.
The recent political turmoil in Tunisia will have negative implications for the economy, at least over the next twelve months. Economic growth will be lower than previously forecast and there remains more risk to the downside. Key economic sectors will be hit and will likely be a source of new non-performing loans going forward. BNA's profitability, as is the case with the Tunisian banking sector, could come under pressure in 2011 on the back of possible asset quality deterioration and limited asset expansion.
BNA can trace its history to 1959, the founding date of one of the two banks specialised in agricultural financing and involved in the 1990 merger creating BNA. The Republic of Tunisia and quasi-government institutions own 66% of the Bank, whose primary mission is to support the government's economic and social development policies. The government retains full management control. The Tunisian government views BNA as a strategic asset and a further dilution of its stake is not on the agenda.
At year-end 2010, the Bank operated 180 branches throughout the country, employing a staff of 2,980. BNA is Tunisia's second-largest in terms of assets (just behind Société Tunisienne de Banque) and capital, controlling about 14% of all commercial banking assets and 14% of loans.
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CONTACT
Primary Analyst
Darren Stubing
Senior Adviser
Tel: +357 2534 2300
E-mail: darren.stubing@ciratings.com
Secondary Analyst & Rating Committee Chairman
Tom Kenzik
Senior Credit Analyst
E-mail: tom.kenzik@ciratings.com
The ratings have been initiated by Capital Intelligence. However, the issuer participated in the rating process. The information sources used to prepare the credit ratings are the rated entity and public information. Capital Intelligence had access to the accounts but no other relevant internal documents of the issuer for the purpose of the rating, but considers the quality of information available on the issuer to be satisfactory for the purposes of assigning and maintaining credit ratings. Capital Intelligence does not audit or independently verify information received during the rating process.
The rating has been disclosed to the rated entity and released with no amendment following that disclosure. Ratings on the issuer were first released in March 1994. The ratings were last updated in March 2010.
The principal methodology used in determining the ratings is Bank Rating Methodology. The methodology and the meaning of each rating category and definition of default, as well as information on the attributes and limitations of CI's ratings, can be found at www.ciratings.com
© Press Release 2011
