Fitch Ratings has affirmed Development Bank of Namibia Limited’s (DBN) Long-Term Issuer Default Ratings (IDR) at ‘BB-‘ and its National Long-Term Rating at ‘AA+(zaf)’, with stable outlook.
“DBN’s ‘BB-‘ Long-Term IDRs are driven by potential support from the Namibian authorities, as expressed by its Government Support Rating (GSR) of ‘bb-‘. DBN’s Long-Term IDRs and GSR are equalized with Namibia’s ‘BB-‘ Long-Term IDRs. The Stable Outlook on DBN’s Long-Term IDRs mirrors that on Namibia’s Long-Term IDRs. DBN’s National Long-Term Rating of ‘AA+(zaf)’ is equalized with that of Namibia and reflects the bank’s creditworthiness relative to that of issuers in South Africa and Namibia. The Stable Outlook reflects that on Namibia’s National Long-Term Rating,” the global ratings agency said.
Fitch said although DBN recorded a loss of N$270 million for the 2023 financial year due to high loan impairment charges, it forecasts the bank to turn profitable in FY24.
“Profitability continued to weaken in FY23 (financial year ending March-2023) due to high loan impairment charges (LICs) that accompanied loan-quality deterioration, resulting in a net loss of NAD270 million (FY22: loss of NAD185 million). Fitch expects LICs to decrease sharply following the completion of its lending book clean-up, and the bank should post a small net profit in FY24,” the ratings agency said.
“DBN’s impaired loans (Stage 3 loans under IFRS 9) ratio increased to 33% at end-March 2023 (end-March 2020: 13%) but eased slightly by end-December 2023 due to write-offs and some recoveries. The sharp deterioration reflects DBN’s weak risk profile due to its development lending focus and weak economic conditions, partly due to the pandemic, weighing on borrowers’ repayment capacity.”
Fitch said despite DBN’s net losses, the institution remains well-capitalized.
“Its high Fitch Core Capital (FCC) ratio of 77% at FYE23 was supported by a low-risk-weight density (49%), mainly reflecting high government-related lending. DBN’s tangible leverage ratio (FYE23: 38%) provides a large buffer to absorb potential further losses.”
The international ratings agency said DBN’s Long-Term IDRs would be upgraded if Namibia’s sovereign ratings are upgraded.
“DBN’s National Long-Term Rating is sensitive to a favorable change in Fitch’s opinion of the bank’s creditworthiness relative to other South African and Namibian issuers’.”
The DBN focuses on financing infrastructure, developmental, and large industrial projects in strategically important sectors.
