Moody's on Dec. 9 revised the 2020 outlook for banks in Africa to negative from stable, reflecting their worsening operating conditions and the increasing pressure on asset quality.
African banks will be highly exposed to their respective sovereigns and that their credit profiles will be directly linked to those of their governments, according to the ratings agency's report.
Meanwhile, asset risk will stay elevated due to the increase in government arrears, high loan concentrations, borrower-friendly legal frameworks and the fact that risk management and supervision capabilities are still evolving.
The rating agency said that most rated African banks will continue to have high capital levels. It added that funding and liquidity in local currencies will remain sound in most countries.
Moody's said there will be regional variation, with banks in Egypt, Morocco, Mauritius and Kenya expected to be more resilient than banks in South Africa, Nigeria, Tunisia and Angola.