Two years ago, the Development Bank of Rwanda (BRD) Plc was in the news for all the wrong reasons –major losses of up to the tune of $22m and uncertainty for shareholders but the development finance institution has rebounded and is looking to turn around its fortunes.
The bank, which has been around for nearly 54 years now, has been buoyed by a B+ rating by US-based FitchRatings, making it the first Bank in Rwanda to be rated in the inaugural rating of banks. The New York-based firm previously rated governments only.
The B+ Stable outlook rating puts BRD at the same rating as the Government of Rwanda. FitchRatings made the announcement on Monday assigning BRD a Long-Term Issuer Default Rating (IDR) of ‘B+’ with a Stable Outlook.
Fitch also assigned BRD a Support Rating Floor (SRF) of ‘B+’ and Support Rating (SR) of ‘4’. According to the bank, this underscores the financial institution’s standing compared to the best banking standards and practices.
BRD Management welcomed the new rating with optimism, saying that the development puts BRD on track to fully recover from the financial losses that nearly drove the bank into liquidation a couple of years ago.
“We have come a long way and we are very encouraged by this rating which comes amidst tough times. Our rating is attributed to the strong support BRD has received from its shareholders to turn the Bank around in a very determined way,” said Kampeta Sayinzoga, the CEO of BRD.
“The BRD team is working relentlessly to live up to the expectations of its shareholders and ensure productive use of capital. This rating will also be instrumental in supporting our upcoming effort to diversify our capital base in the medium term. It re-energizes our endeavors to deliver on our mandate to sustainably improve the socio-economic development of Rwandans,” she added.
BRD said the rating further validates the Bank’s recent improvements, growth prospects, and continued expected financial stability. The rating is also expected to play a major role in the strengthening of BRD’s capability to attract new strategic financial partners to enable it to play a more prominent role as the only development bank in Rwanda.
The bank says it is looking to increase its capacity to leverage longer-term funding at attractive rates for economic actors in Rwanda in the medium term, building on the rating to attract more investors to capitalize its portfolio.
“BRD’s ratings reflect Fitch’s view of the current financial status of the Bank and the commitment of its majority shareholders (i.e. the Government of Rwanda) to position the Bank as a strategic vehicle to implement the National Strategy for Transformation (NST1) and the Sustainable Development Goals (SDGs),” the bank said in a statement.
BRD Plc is 97% owned by the government, through Agaciro Development Fund, the country’s sovereign wealth fund, which has 55% and the Rwanda Social Security Board (RSSB) which has 42% and is overseen by the Ministry of Finance.
BRD has recently benefitted from several capital injections which have strengthened its ability to deliver on its ambitious developmental objectives. The Bank, which is regulated by Rwanda’s Central Bank, and is subject to compliance with the prudential requirements, is looking to capitalise on the positive outlook to attract more lenders.
“The rating puts us in a good position with the lenders, in terms of having lenders having confidence in the bank and also puts us in a stronger position to get capitalized, because the credit risk has been reduced,” said Vincent Ngirikiringo, the BRD Chief Finance Officer.
He said the rating increases the confidence of shareholders and also means the bank works with international standards, is trusted by the government, and focuses on crucial areas of investment that are important to the economy.
“When they are analysing the bank’s performance, they look at the past, present and future. When rating the bank, they look at losses and profits. Our losses reduced by less than 77% percent and this has to do with change the management, removing inefficiencies and other efforts that led to the bank rebounding,” he said.
The Bank’s performance has significantly improved with losses reduced by more than 77% in 2019 compared to the previous two years.
This performance has mainly been driven by the recovery efforts on the written off book and stopping migration of good loans to bad loans which has made the Net impairment charge on loans and advances to significantly reduce by 31% compared to the previous year.
“The close monitoring of our customers has resulted into significant improvements of the Bank’s non-performing ratio that has dropped from 19.34% in 2018 to 7.52% end 2019,” the bank said.
In line with COVID-19, Ngirikiringo said the bank is looking to support its clients, mainly businesses that have been affected by the pandemic to remain afloat.