CRRH-UEMOA -- Moody's affirms the ratings of CRRH-UEMOA, changes the outlook to negative from stable

Rating Action: Moody's affirms the ratings of CRRH-UEMOA, changes the outlook to negative from stableGlobal Credit Research - 08 Mar 2022London, 08 March 2022 -- Moody's Investors Service ("Moody's") has today affirmed the following ratings of Caisse Regionale de Refinancement Hypothecaire de l'UEMOA (CRRH-UEMOA): the Ba2 long-term corporate family rating (CFR), the Ba2/Not Prime long and short-term local currency issuer rating, as well as the Ba3/Not Prime long and short-term foreign currency issuer rating. At the same time, Moody's has changed the issuer outlook to negative from stable.CRRH-UEMOA is a regional financial institution established in 2010 and based in Togo, with operations across the West African Economic and Monetary Union (WAEMU). CRRH-UEMOA operates as a residential mortgage refinancing vehicle.A list of affected ratings is provided at the end of this press release.RATINGS RATIONALE-- AFFIRMATION OF RATINGS REFLECTS SOUND STANDALONE PROFILE AND PARENTAL SUPPORTMoody's affirmation of CRRH-UEMOA's long-term ratings reflects the company's strong asset quality underpinned by conservative structuring of its lending, matched asset-liability maturity combined with solid liquidity, and adequate capitalisation. As of December 2020, CRRH-UEMOA reported a TCE to tangible managed assets ratio of 9.2%, with an additional quasi-equity subordinated debt of around 17.8%. The firm's liquid assets to total assets stood at 32.4%.CRRH-UEMOA's standalone assessment also captures the challenges from CRRH-UEMOA's monoline activity that significantly constrains its franchise value and profitability; as well as from the operating environment of the WAEMU and the relatively high counterparty risk of the banks whose mortgage loans it refinances.CRRH-UEMOA's Ba2 long-term CFR incorporates two notches of affiliate support uplift from the firm's b1 standalone assessment, reflecting Moody's assessment of a high probability of affiliate support in case of need from its sponsor and largest shareholder, The West African Development Bank (BOAD, Baa1 negative). Despite BOAD's declining ownership stake in CRRH-UEMOA (15% at present), the entity remains of strategic importance for BOAD and the WAEMU member states given its role in the promotion and development of residential mortgage lending in the WAEMU region. The high probability of support also reflects the strong operational and financial interlinkages between the two institutions.CRRH-UEMOA's Ba2 long-term local currency issuer rating is aligned with its Ba2 long-term CFR. CRRH-UEMOA's long-term foreign currency issuer rating is capped by the foreign currency country ceiling at Ba3. For assessing the foreign currency country ceiling applicable to CRRH-UEMOA, Moody's uses the weighted average ceiling of the countries in which CRRH-UEMOA operates. The foreign currency country ceiling applied to CRRH-UEMOA reflects the currency convertibility and transferability risk in the region.-- NEGATIVE OUTLOOK REFLECTS THE FIRM'S MATERIAL EXPOSURE TO THE MALIAN BANKING SYSTEM AND OPERATING ENVIRONMENTMoody's decision to change the entity's outlook to negative from stable reflects the company's material exposure to the Malian banking system and operating environment, via the funding provided to the Malian banks to facilitate the origination of mortgages in this country. Following the economic and financial sanctions imposed by the Economic Community of West African States (ECOWAS) and the WAEMU in early January 2022, the Government of Mali has missed bond payments since January 2022. While CRRH-UEMOA does not have any direct exposure to the Malian sovereign, the company is exposed to the Malian operating environment (which risks deteriorating further) and banking system (which is affected by these sanctions, even if it has so far remained broadly stable). The sanction on cross-border payments in fact poses significant risk to the liquidity of Mali's banking system, to which CRRH-UEMOA has direct exposure.The financial sanctions imposed by ECOWAS and the WAEMU followed Mali's military-led government's intention to extend its military rule to five years, rather than sticking to its previous commitments to hold elections by February this year. Moody's downgraded the Government of Mali's issuer rating to Caa2 from Caa1, and placed its ratings on review for further downgrade (Please see https://www.moodys.com/research/--PR_462338) on 4 February 2022.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSUpwards pressure on the ratings is limited given the negative outlook. A stabilisation of the outlook could result from Moody's expectation that economic and financial sanctions will be lifted following an agreement between the Malian military-led government and the ECOWAS/international community; and/or an assessment that CRRH-UEMOA will remain able to collect its dues from the Malian banking system no matter how sanctions evolve; and/or an assessment that the strength of CRRH-UEMOA's operating environment remains broadly unchanged.Downwards pressure on the ratings could result from protracted economic and financial sanctions on the Government of Mali, along with an assessment that CRRH-UEMOA will find it more difficult to collect its dues from the Malian banking system, or an assessment that the strength of CRRH-UEMOA's operating environment has weakened. LIST OF AFFECTED RATINGS ..Issuer: CRRH-UEMOA Affirmations: ....Long-term Issuer Rating (Foreign Currency), Affirmed Ba3....Long-term Issuer Rating (Local Currency), Affirmed Ba2....Short-term Issuer Ratings, Affirmed NP....Long-term Corporate Family Rating, Affirmed Ba2Outlook Action:....Outlook, Changed To Negative From StablePRINCIPAL METHODOLOGYThe principal methodology used in these ratings was Finance Companies Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187099. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Mik Kabeya Vice President - Senior Analyst Financial Institutions Group Moody's Investors Service Ltd. One Canada Square Canary Wharf London E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Constantinos Kypreos Senior Vice President Financial Institutions Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. 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