Banking industry is ‘still healthy’ despite Moody’s downgrades – Absa

2014-08-20 11:06

Moody’s has downgraded the credit ratings of South Africa’s four biggest banks and kept them on review for a further cut following the collapse of African Bank Investments Limited.

The local-currency deposit ratings of Standard Bank, FirstRand, Nedbank Group and Absa Bank, a unit of Barclays, were cut one level to Baa1 – the third- lowest investment grade – from A3, Moody’s said yesterday.

Standard Bank’s issuer rating was lowered to Baa2 from Baa1 while all ratings, including Investec, were put on review for downgrade.

The South African Reserve Bank placed African Bank, an unsecured lender, into administration on August 10 after it reported a record loss and said it needed at least R8.5 billion of capital. The rescue included a 10% impairment of African Bank’s senior and wholesale debt, a move that Moody’s said suggested South African authorities won’t fully protect creditors in the case of a bank failure.

Moody’s said that the central bank’s response, while helping contain the risk of contagion, “indicates the regulator’s willingness to impose losses on creditors”.

“This needs to be reflected in Moody’s ratings, as debt ratings speak to both the likelihood of a default on contractually promised payments and the expected financial loss suffered in the event of default.” it said.

Absa, FirstRand and Nedbank’s senior unsecured debt was also cut one level to Baa1.

Standard Bank has declined by 3.1% since African Bank was placed under curatorship and FirstRand dropped by 0.3%.

Standard Bank said that the country’s banking industry remains strong and that there is no indication other lenders have been affected negatively by the failure of African Bank.

Absa said the ratings downgrade wasn’t specific to the company and that the country’s banking industry remained healthy.

Join the conversation! encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions. publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Inside News24

Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.