Fitch Ratings on Monday affirmed the Development Bank of Southern Africa (DBSA) ratings at National Long-term 'AAA(zaf)', National Short-term 'F1+(zaf)' and Support '2'.
The Outlook for the National Long-term rating is Stable.
The ratings of DBSA are based solely on the high level of perceived support that the bank enjoys by virtue of the South African government's 100%-ownership of the institution.
DBSA also has access to a callable capital facility of R4.8 billion, which the government is obliged to provide in the event of the bank being unable to meet its commitments.
The government has expressed its intention in 2009 to increase the callable capital facility to R20 billion to support DBSA's plans for rapid loan book growth.
Although DBSA's net earnings increased 12.7% in the financial year to end March 2009 (FY09), Fitch notes that sustainable earnings relative to average assets continues to decrease on account of tighter interest margins and a growing balance sheet.
Fitch expects that the increased callable capital could improve DBSA's overall cost of funding, which should translate into increased sustainable earnings.
Management expect, however, a significant decline in net earnings in FY10.
DBSA reported rapid loan growth of 26.5% to R30.2 billion at FYE09.
The bank's loan book is concentrated in its exposure to local government and public utilities.
Fitch noted that DBSA's impairment charges decreased by 28% to FYE09, despite a 31.1% increase in non-performing loans (NPLs).
Lending outside of South Africa contributed 72.8% of the impairment charge and represented 43.8% of NPLs at FYE09.
At FYE09, DBSA reported an NPL ratio of 5.4% with relatively low coverage of 46.5% (FYE08: 5.2% and 47.6%, respectively).
DBSA reported a core capital/total assets ratio of 42.7% at FYE09 (FYE08: 47.5%).
