Fitch: African banks still popular amongst investors, despite risks
The rating agency said that cross-border cooperation with regulators will be required to lower risks.Although sub-Saharan African banks tend to have highly speculative fundamental credit quality, strategic investors are still looking to expand in the region to create pan-African networks, said Fitch Ratings in a new report.
It cited the example of Barclays, which is progressing with the sale of its African banking franchise, and Nigeria's United Bank for Africa, which is diversifying into new countries.
This is despite the fact that the outlook on eight of Fitch's 19 African sovereign ratings is Negative and the IMF forecast that GDP growth in sub-Saharan Africa will fall to three per cent in 2016.
Fitch said that while pan-African franchises make strategic sense for some of the largest African banks, they create additional challenges for bank regulators.
It believes that further cross-border cooperation with other sub-Saharan African regulators will be required to ensure that systemic risks do not build up and regulators have access to transparent and comparable information.
In particular, the rating agency cited French-speaking sub-Saharan African countries, where regulation tends to be weaker.