Fitch does not expect African banking crisis, cautious on Angolan lenders

Fitch Ratings does not expect a banking crisis in African countries it covers, although it warned that Angolan lenders were looking "somewhat vulnerable" due to sovereign risks to the country.

Lenders in Angola are on relatively weak footing, Mahin Dissanayake, senior director and head of African bank ratings at Fitch Ratings, said on Friday, adding Fitch's "CCC" rating on the country's debt suggested a real possibility that Africa's second biggest oil producer could default.

Angola is saddled with debt following a sharp decline in crude prices and the impact of the coronavirus pandemic on its economy.

Last month, Angola's finance minister said the country hopes to get breathing space on repayment of debt for the next three years as a result of negotiations with its main creditors.

A return to pre-pandemic growth rates for South African lenders would surely take more than two years, Dissanayake told the Reuters Global Markets Forum (GMF), while expressing concerns about rising unemployment and its impact on the unsecured retail lending portions of the banks' loan books.

On Nigerian banks, Fitch's Dissanayake said their ability to generate strong revenue would help blunt the impact of higher expected credit costs. Nigerian lenders have benefited from the stabiliz of oil prices following a plunge in the first quarter of 2020.

"Recovery will be driven by volume growth," he said, adding that a key trigger would be the expiry of Nigerian debt relief measures by the end of March.

He forecast the average impaired loan ratio, based on international accounting standards, for Nigerian banks that Fitch covers to rise to about 10% by the end of 2021 from the current 7%.

The International Monetary Fund has forecast a 3.25% contraction in the oil-supported economy in 2020, while calling for broad market and exchange rate reforms to fix Nigeria's balance of payment pressures.

Nigeria's banking stock index rose 2.5% on Friday, recovering from Thursday's 4.8% drop, which was triggered by ratings agency Moody's warnings on a surge in bad loans. The local benchmark fell 0.9%.