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Economic development

Moody's Affirms East African Development Bank's Foreign Currency Rating at Baa3

Strategic Insights

— 1 min read

Moody's Investors Service has affirmed the East African Development Bank's (EADB) foreign currency long-term issuer rating at Baa3, with a stable outlook. The rating affirmation reflects the bank's robust capital and liquidity positions, improved asset performance in recent years, and solid risk management practices. However, the rating is counterbalanced by weak asset quality, limited funding sources, and high concentration of assets in EADB's four countries of operations.

Key Takeaways:

  • EADB's leverage ratio is 58% in 2024, making it one of the least leveraged rated multilateral development banks.
  • The bank maintains robust liquidity buffers, with liquid assets amply covering net cash outflows over an 18-month horizon.
  • EADB's funding profile is largely sourced from credit lines from other MDBs and regional financial institutions, which provide stable yet undiversified financing.
  • The bank's asset quality is weak, with a non-performing assets ratio of 0.8% in 2024, but has strengthened in recent years.
  • EADB's shareholders have low ability to provide support, limiting the uplift from callable capital buffers.
  • The stable outlook reflects Moody's expectations that EADB will maintain solid capital and liquidity positions over the coming years and implement its strategic plan for lending expansion.
  • The bank's funding base is likely to remain narrow, and the rating may face downward pressure if shareholder support weakens further or asset quality deteriorates.

Statistics:

  • EADB's leverage ratio: 58% in 2024
  • Liquid assets coverage: 7x in the past three years
  • Non-performing assets ratio: 0.8% in 2024
  • Cumulative loan growth target: 200% over 2024-2028
  • East African Development Bank's long-term issuer rating: Baa3

Sources:

  • Moody's Ratings News Release
  • Multilateral Development Banks and Other Supranational Entities (rating methodology)
  • OPEC Fund for International Development (OFID) - Arab Bank for Economic Development in Africa (BADEA) - Kreditanstalt fur Wiederaufbau (KfW) - African Development Bank (AfDB)

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