Moody’s lowers largest South African banks

Moody's Investors Service said it downgraded the long-term local- and foreign-currency deposit ratings of the five largest South African banks: Standard Bank of South Africa Ltd., FirstRand Bank Ltd., Absa Bank Ltd., Nedbank Ltd. and Investec Bank Ltd. to Baa3 (negative) from Baa2 (Rating Under Review outlook).

The agency also downgraded Standard Bank Group Ltd.’s long-term local- and foreign-currency issuer ratings to Ba1 from Baa3, and affirmed all banks' national scale ratings.

This action concludes the review initiated on April 4 and follows the weakening of the South African government's credit profile, as captured by Moody's similar action on the sovereign rating on June 9.

Moody’s said the primary driver for the downgrades is the challenging operating environment in South Africa, characterized by a pronounced economic slowdown, and weakening institutional strength that led the agency to lower South Africa's macro profile score to “moderate-” from “moderate.” The lower macro profile exerts pressure on the individual factors on banks' scorecards, and implies that the country's banks need stronger loss-absorption and liquidity buffers to withstand the headwinds and in order to remain at the same rating levels.

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