Moody's Investors Service has today affirmed the B1/ Not Prime long and short-term local-currency deposit ratings and the B2/ Not Prime long and short-term foreign-currency deposit ratings of NMB Bank PLC and CRDB Bank Plc. The outlook on the banks' long-term deposit ratings was changed to negative, from stable.
At the same time, Moody's has affirmed NMB Bank PLC's b1 baseline credit assessment (BCA), b1 adjusted BCA, and Ba3(cr)/ Not Prime(cr) Counterparty Risk Assessment (CR Assessment) and CRDB Bank Plc's b2 BCA, b2 adjusted BCA, and B1(cr)/ Not Prime(cr) CR Assessment.
The rating changes reflects to varying degrees their leading domestic franchises, characterised by deposit-based funding profiles, solid liquidity levels and capital buffers that provide a strong recurring loss absorption capacity. These credit strengths protect these banks against the current challenges in Tanzania's broader operating environment, that have already materialised as weaker profitability and/ or asset quality metrics.
Moody's assigned a negative outlook to the long-term ratings of NMB Bank and CRDB Bank reflecting the negative outlook on the Government of Tanzania's newly assigned B1 rating. Tanzania's negative outlook indicates that the balance of risks to the country's credit profile are tilted to the downside due to an increasingly unpredictable policy environment, weighing on the business climate. Uncertainty over the regulatory environment and policy stance of the government, particularly as it relates to the mining sector, could have a long-term negative impact on the country's growth potential and ability to attract foreign investment.
For NMB Bank, the negative outlook captures the strong interlinks between its own standalone creditworthiness and the credit profile of the sovereign, given its holdings of sovereign debt securities. For CRDB Bank, its local currency deposit rating benefits from a one-notch of systemic uplift and the negative outlook reflects Tanzania's government potentially weakening capacity to support CRDB Bank, in case of need.