Fitch Ratings, has disclosed in its 2024 African Banks Outlook report that African banks will remain exposed to domestic and global operating environment risks in 2024.

However, most countries are showing a good degree of resilience, supported by high commodity prices.

It said gross Domestic Product (GDP) growth will generally remain moderate, with no major African economy set to face recession.

“Asset quality risks will remain prominent, with households and businesses continuing to be hit by high inflation and high interest rates, and currency depreciation – as well as US dollar shortages in some cases”, it pointed out.

“Nevertheless, we assume only a moderate increase in impaired loan ratios, with most banks able to address rising asset quality risks through strong pre-impairment profits, stemming from high-interest rates, still-satisfactory loan growth and, in some markets, revaluation gains on long net open-currency positions”, it said

The UK-based firm said sovereign debt distress is a major risk to African banks’ financial profiles.

It added that many sovereigns are facing very high debt-servicing burdens, exacerbated by high interest rates, US dollar strength and challenging external financing conditions.

It concluded that the average sovereign rating for African countries in which Fitch rates banks is ‘B’, and contagion risks to banks are significant given high sovereign exposure.