Capital Intelligence (CI), the international credit rating agency, today announced that it has affirmedthe Foreign Currency ratings of Tunisia’s Banque Nationale Agricole (BNA) at BB+ (Long-term) and A3(Short-term), and the Financial Strength rating at B+. The Support rating was maintained at 2. Due toBNA’s improved asset quality and capital position, the Outlook was raised to Positive from Stable forthe Financial Strength rating.BNA can trace its history to 1959, the founding date of one of the two banks specialised in agriculturalfinancing and involved in the 1990 merger creating BNA. The Republic of Tunisia and quasigovernmentinstitutions own 65% of the Bank, whose primary mission is to support the government’seconomic and social development policies. The government retains full management control. TheTunisian government views BNA as a strategic asset and a further dilution of its stake is not on theagenda.BNA still faces a number of challenges in enhancing its financial profile. These largely centre on a highlevel of non-performing loans (NPLs) and low provisioning. However, BNA’s asset quality has shownconsistent improvement over the last few years, particularly an increase in the Bank’s loan-loss reservecoverage against NPLs and a fall in the gross level of NPLs. Weak asset quality has led to lowprofitability as there is a need for continued high provisioning.In regards to profitability, the Bank recorded improvement to end-June 2009. The provision chargecontinues to consume a significant proportion of operating profit; this is likely to remain the situationover the next few years. Liquidity is somewhat tight, mainly due to the fact that loans form a highpercentage of total assets. Capital adequacy is adequate but only just so as the position is eroded bythe shortfall in provisions. Nonetheless, the Bank raised Tier 2 capital through a subordinated issue inH1 2009 and this will support the balance sheet at least over the short term. Further improvement inprovisioning coverage, a lower level of NPLs and higher profitability are likely to result in a higherfinancial strength rating going forward.With assets of USD4,023mn (TND5,436mn) at end-June 2009, BNA is the second largest bank in theTunisian banking sector, controlling around 15% of banking system assets.