SA banks downgraded

·17 Jan 2013

Absa Standard Bank Capitec FNB Nedbank banking bank

Fitch has downgraded the ratings of South Africa’s banks following similar action taken on the country’s sovereign debt.

The viability ratings (VR) of Absa Bank, FirstRand, Investec, Nedbank, and Standard Bank have been downgraded by one notch following the one-notch downgrade of South Africa’s foreign currency issuer default rating (IDR) to ‘BBB’.

The downgrade of the banks’ VRs reflects the major banks’ concentration to South Africa; a high proportion of liquid assets invested in government securities; and a weakening operating environment as indicated by the downgrade of the sovereign rating, Fitch, the ratings firm said.

The sovereign rating is now effectively acting as a cap on these banks viability ratings at this level because of their strong links with South Africa, Fitch said.

It added that the downgrade of the sovereign has also resulted in a re-calibration of the South African National Rating Scale, which has affected several other institutions in the country.

While all the banks’ VR were downgraded, Absa’s long-term IDR remained the same, and it’s national long-term rating was upgraded to AAA.

South African bank ratings (01/2013)

Bank	Visibility rating	Long-term issuer default rating
Standard Bank	BBB	BBB
Absa	BBB	A-
FirstRand	BBB	BBB
Investec	BBB-	BBB-
Nedbank	BBB	BBB

On 10 January 2013 Fitch downgraded South Africa’s sovereign debt by one notch to ‘BBB’ and added that the outlook was stable.

“Economic growth performance and prospects have deteriorated, affecting the public finances and exacerbating social and political tensions,” Fitch said, explaining the key reason for its action.

The cut brought Fitch’s rating of South Africa’s sovereign debt in line with Standard & Poor’s, which cut South Africa’s credit rating to ‘BBB’ (or Baa2) in October 2012 due to job layoffs, slowed growth and a negative knock-on impact on the financial and socio-economic position of the country.