Fitch Affirms Development Bank of Southern Africa at 'AAA(zaf)'; Outlook Stable
Fitch Ratings-London/Johannesburg-02 November 2009: Fitch Ratings has today affirmed the Development Bank of Southern Africa Limited's (DBSA) ratings at National Long-term 'AAA(zaf)', National Short-term 'F1+(zaf)' and Support '2'. The Outlook for the National Long-term rating is Stable.
The ratings of DBSA are based solely on the high level of perceived support that the bank enjoys by virtue of the South African government's 100%-ownership of the institution. DBSA also has access to a callable capital facility of ZAR4.8bn which the government is obliged to provide in the event of the bank being unable to meet its commitments. The government has expressed its intention in 2009 to increase the callable capital facility to ZAR20bn to support DBSA's plans for rapid loan book growth.
Although DBSA's net earnings increased 12.7% in the financial year ended 31 March 2009(FY09), Fitch notes that sustainable earnings relative to average assets continues to decrease on account of tighter interest margins and a growing balance sheet. Fitch expects that the increased callable capital could improve DBSA's overall cost of funding, which should translate into increased sustainable earnings. Management expect, however, a significant decline in net earnings in FY10.
DBSA reported rapid loan growth of 26.5% to ZAR30.2bn at FYE09. DBSA's loan book is concentrated in its exposure to local government and public utilities. Fitch noted that DBSA's impairment charges decreased by 28% to FYE09, despite a 31.1% increase in non-performing loans (NPLs). Lending outside of South Africa contributed 72.8% of the impairment charge and represented 43.8% of NPLs at FYE09. At FYE09, DBSA reported an NPL ratio of 5.4% with relatively low coverage of 46.5% (FYE08: 5.2% and 47.6%, respectively). DBSA reported a core capital/total assets ratio of 42.7% at FYE09 (FYE08: 47.5%).
For further information, please refer to credit analysis report 'Development Bank of Southern Africa' on www.fitchratings.com.
Contact: Frederick Fouche, Anthony Walker, Johannesburg, Tel: +27 11 380 0900
Media Relations: Hannah Warrington, London, Tel: +44 (0) 207 417 6298, Email: hannah.warrington@fitchratings.com.
Note to Editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(zaf)' for National ratings in South Africa. Specific letter grades are not therefore internationally comparable.
Additional information is available on www.fitchratings.com.
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