The credit ratings of South Africa\u2019s five largest banks were downgraded deeper into junk territory by Fitch Ratings, which cited a deteriorating operating environment following the outbreak of the novel coronavirus.<\/p>\n
The ratings were reduced by one notch to BB, two steps below investment grade and one notch lower than that of South Africa, Fitch said in a statement late Tuesday.<\/p>\n
Moody\u2019s Investors Service also lowered its assessment on the lenders one notch to bring it into line with the sovereign, which was downgraded last week.<\/p>\n
\u201cThe South African operating environment is particularly exposed to the pandemic because of its highly dense and vulnerable communities,\u201d Fitch said.<\/p>\n
The lenders face multiple challenges including \u201ca decline in client activity, lower interest rates, which will put pressure on margins, and rising credit losses.\u201d<\/p>\n
Absa Group Ltd had anticipated the risk of a sovereign-ratings downgrade and built up \u201csubstantial buffers to withstand significant stress scenarios,\u201d the Johannesburg-based company said in an email. \u201cWe remain confident that we have significant financial resources to remain resilient through the current crisis.\u201d<\/p>\n
The other banks affected by the Fitch downgrade include Standard Bank Group Ltd, Nedbank Group Ltd, Investec Ltd, and the local unit of FirstRand Ltd.<\/p>\n