Fitch downgrades Afreximbank to one notch above 'junk'

By Libby George

LONDON, June 4 (Reuters) - Fitch downgraded Afreximbank's credit rating to one notch above junk on Wednesday, with a negative outlook, citing high credit risks and weak risk-management policies.

The one-notch downgrade to BBB- comes as the African lender battles to protect its loans from restructuring in Ghana, Zambia and Malawi, claiming that as a multilateral lender it has preferred creditor status.

Fitch pegged Afreximbank's non-performing loans at above 6%, while the bank itself reported an NPL ratio of 2.44% in the first half.

"The revision of risk management to 'weak' reflects low transparency in the recent reporting of loan performance relative to multilateral development bank peers and that Fitch's definition of NPLs differs from the bank's approach, which makes use of flexibilities offered by IFRS 9," Fitch said.

A lower credit rating can increase the borrowing cost for an issuer, which can in turn impact how much they can lend and at what rates.

Fitch attributed the negative outlook, which effectively puts the bank on downgrade watch, to the risk that some of its debt to sovereign borrowers might be included in restructuring.

"This would put pressure on our assessment of the bank's policy importance and heighten the risk associated with its strategy," Fitch said.

Afreximbank did not immediately comment on the downgrade.