Tuesday 05, December 2017 by Matthew Amlôt

Moody's places on review for downgrade the ratings of five South African Banks

Moody's Investors Service has today placed on review for downgrade the Baa3 long-term local- and foreign-currency deposit ratings of the five largest South African banks.

The Standard Bank of South Africa Limited (Standard Bank of South Africa), FirstRand Bank Limited, Absa Bank Limited, Nedbank Limited and Investec Bank Ltd. The rating agency has also placed on review for downgrade the Ba1 long-term local- and foreign-currency issuer ratings of Standard Bank Group Limited and Barclays Africa Group Limited. The long-term national-scale ratings (NSRs) for these banks were also placed on review for downgrade, while Mercantile Bank Limited's Baa1.za/P-2.za national-scale issuer ratings were placed on review for upgrade.

Today's rating review action is driven primarily by 1) the potential weakening of the South African government's credit profile, as captured by Moody's recent decision to place South Africa's Baa3 government bond ratings on review for downgrade, which affects the banks through their sizable holdings of sovereign debt securities, inevitably linking their creditworthiness to that of the national government, and 2) the challenges the banks face in the operating environment in view of weak economic growth in South Africa, which poses the risk of further undermining consumer and investor confidence, increasing asset price volatility and funding costs.


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