Fitch affirms SA bank ratings

2014-07-18 08:37

The long-term issuer default ratings (IDR) of South Africa’s major banks has been affirmed by the Fitch Ratings agency.

“Fitch Ratings has affirmed the long-term IDR of FirstRand Bank Limited (FirstRand), Absa Bank Limited (Absa Bank), Investec Bank Limited (Investec Bank), Nedbank Limited (Nedbank) and The Standard Bank of South Africa Limited (SBSA),” Fitch said yesterday.

It had done the same for the holding companies of SBSA, Nedbank, Investec Bank and Absa Bank.

This took place as part of Fitch’s review of South African banks.

“Fitch has also assigned long-term local currency IDRs to Investec Limited (Investec) and Investec Bank.”

The major South African banks all had a strong domestic franchise, which underpinned stable core earnings, sophisticated risk management and acceptable liquidity and capitalisation.

This was offset by South Africa’s weakening operating and economic environment.

It also considered the banks’ high loan concentration within South Africa and a high proportion of liquid assets invested in domestic government securities.

The “BBB” viability ratings of Absa Bank, Barclays Africa Group Limited (BAGL), FirstRand, Nedbank, Nedbank Group Limited, SBSA and Standard Bank Group Limited were effectively capped at that rating level.

This was because of their strong links with South Africa and the operating environment. Investec Bank and Investec VRs were one notch lower at “BBB-”.

“The IDRs and senior debt of the major South African groups, excluding BAGL and Absa Bank, are driven by their intrinsic strength as indicated by their VRs,” Fitch said.

“BAGL and Absa Bank’s IDRs and senior debt are driven by potential support from 62.3% parent Barclays Bank Plc ... and have been affirmed at ‘A-’.”

BAGL and Absa Bank’s IDRs were notched once from Barclays’ rating, reflecting Fitch’s view of BAGL and Absa Bank as strategically important subsidiaries.

The national ratings of the major banking groups had been affirmed and were driven by the entities’ long-term local currency IDRs.

National ratings reflected the creditworthiness of an issuer relative to the best credit in the country.

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