Limassol, May 10, 2016 -- Moody's Investors Service has repositioned the national scale ratings
(NSRs) of nine banks and other financial institutions issuers in South
Africa (Standard Bank of South Africa, FirstRand Bank Limited,
ABSA Bank Limited, Nedbank Limited, Investec Bank Ltd.,
Bidvest Bank Limited, Sasfin Bank Limited, Real People Investment
Holdings (Pty) Ltd, and Mauritius Commercial Bank Limited) in conjunction
with the recalibration of the South African national rating scale.
In addition, the NSRs of Mercantile Bank Limited remained unafffected,
and the NSRs of Grindrod Bank Limited were withdrawn for business reasons.
At the same time, Moody's has publically assigned global scale
ratings (GSRs) to four issuers. This rating action also concludes
the review initiated on the NSRs of the five largest South African banks
on 10 March 2016.
NSRs, which provide a measure of relative creditworthiness within
a single country, are derived from GSRs using country-specific
maps. The adoption of a revised correspondence between Moody's
GSRs and the South African national scale, and the publication of
previously unpublished GSRs, follows the publication of Moody's
updated methodology "Mapping National Scale Ratings from Global Scale
Ratings"
https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_189032.
To enhance transparency of the meaning of NSRs and to minimize the chances
they will be misinterpreted, the updated methodology calls for the
publication of an issuer's corresponding GSR whenever Moody's
publishes an issuer's NSR. While this has long been Moody's
typical practice, it will now be applied to all issuers with NSRs.
As a result, Moody's is now publishing for the first time
the GSRs of several issuers that previously only had public NSRs.
For more information, please see "Moody's publishes
updated methodology for national scale ratings" (https://www.moodys.com/research/--PR_348579)
.
As the number of fundamental issuers in South Africa rated by Moody's
has fallen below 60, the new map has been designed using the standard
approach, whereby the map design is selected from a set of standard
maps based upon the anchor point, or the lowest GSR that can map
to a Aaa.za. Structured finance ratings are not taken into
consideration in the determination of the map design. As per the
standard approach, South Africa's anchor point is being lowered
to Baa2, which is equal to the sovereign bond rating, from
the previous level of A1. In addition, in order to clarify
the meaning of NSRs, overlap -- where two GSRs can correspond
to the same NSR -- has been eliminated from the South African national
scale map, so every NSR now maps back to just one GSR. However,
all GSRs from Baa2 to B3 will map to two ratings on the national scale,
ensuring adequate opportunities for credit differentiation even at the
GSRs of Baa2 and Baa3, where ratings concentrations are highest.
As a result of these changes, GSRs of Ba2 and above will correspond
to higher NSRs on the South African scale than they did previously,
in some cases considerably so, while GSRs of B2 to Caa1 will correspond
to lower NSRs.
Consequently, approximately 90% of South African fundamental
issuer's primary long-term NSRs are being repositioned an
average of 2.7 notches higher. However, some ratings
will rise by as much as 5 notches. Certain short-term and
other NSRs may be affected for these and other issuers as well.
A very small number of fundamental and structured NSRs are being repositioned
one to three notches lower. The repositioned NSRs of individual
issuers do not signify a change in credit risk, since the GSRs for
these issuers remain unchanged.
As a result of the recalibration, the level of risk associated with
a particular South African NSR level (e.g. Aa2.za)
has changed in many cases. NSRs have no inherent absolute meaning
in terms of default risk or expected loss; they are ordinal rankings
of creditworthiness relative to other domestic issuers within a given
country. A historical probability of default and/or expected loss
consistent with a given NSR can be inferred from the GSR to which it maps
back at that particular point in time. However, both the
probability of default and the expected loss of an NSR may change if and
when a country's national scale is remapped.
The NSR changes for the five largest South African banks follow the confirmation
of their corresponding GSRs and the confirmation of South Africa's
sovereign bond rating of Baa2 (Negative) on 6 May 2016.
ISSUERS AND RATINGS AFFECTED
Issuer: ABSA Bank Limited
....NSR LT Bank Deposits (Local Currency)
repositioned to Aa1.za from A1.za
....NSR ST Bank Deposits (Local Currency)
confirmed at P-1.za
-----------
Issuer: FirstRand Bank Limited
....NSR LT Bank Deposits (Local Currency)
repositioned to Aaa.za from A1.za
....NSR ST Bank Deposits (Local Currency)
confirmed at P-1.za
....NSR Junior Subordinated Regular Bond/Debenture
(Local Currency) repositioned to A1.za (hyb) from A3.za
(hyb)
....NSR Junior Subordinate MTN (Local Currency)
repositioned to A1.za from A3.za
....NSR Subordinate (Basel III compliant)
MTN (Local Currency) repositioned to A1.za from A3.za
....NSR Senior Unsecured MTN (Local Currency)
repositioned to Aaa.za from A1.za
....NSR Subordinate Regular Bond/Debenture
(Local Currency) repositioned to Aa2.za from A2.za
....NSR Subordinate (Basel III compliant)
Regular Bond/Debenture (Local Currency) repositioned to A1.za from
A3.za
....NSR Senior Unsecured Regular Bond/Debenture
(Local Currency) repositioned to Aaa.za from A1.za
....NSR Other Short Term (Local Currency)
confirmed at P-1.za
-----------
Issuer: Investec Bank Ltd.
....NSR LT Bank Deposits (Local Currency)
repositioned to Aa1.za from A1.za
....NSR ST Bank Deposits (Local Currency)
confirmed at P-1.za
-----------
Issuer: Nedbank Limited
....NSR LT Bank Deposits (Local Currency)
repositioned to Aa1.za from A1.za
....NSR ST Bank Deposits (Local Currency)
confirmed at P-1.za
....NSR Subordinate MTN (Local Currency) repositioned
to Aa3.za from A2.za
....NSR Senior Unsecured MTN (Local Currency)
repositioned to Aa1.za from A1.za
....NSR Pref. Stock Non-cumulative
(Local Currency) confirmed at Baa1.za (hyb)
....GSR Senior Unsecured MTN (Local Currency)
published at (P)Baa2
....GSR Subordinate MTN (Local Currency) published
at (P)Baa3
-----------
Issuer: Standard Bank of South Africa
....NSR LT Bank Deposits (Local Currency)
repositioned to Aa1.za from A1.za
....NSR ST Bank Deposits (Local Currency)
confirmed at P-1.za
-----------
Issuer: Bidvest Bank Limited
....NSR LT Issuer Rating (Local Currency)
repositioned to A1.za from A3.za
....NSR ST Issuer Rating (Local Currency)
repositioned to P-1.za from P-2.za
....GSR LT Issuer Rating (Local Currency)
published at Ba1 Stable
....GSR ST Issuer Rating (Local Currency)
published at NP
-----------
Issuer: Sasfin Bank Limited
....NSR LT Issuer Rating (Local Currency)
at Baa2.za not affected in this action
....NSR ST Issuer Rating (Local Currency)
repositioned to P-3.za from P-2.za
....GSR LT Issuer Rating (Local Currency)
published at Ba3 Stable
....GSR ST Issuer Rating (Local Currency)
published at NP
-----------
Issuer: Mercantile Bank Limited
....NSR LT Issuer Rating (Local Currency)
at Baa3.za not affected in this action
....NSR ST Issuer Rating (Local Currency)
at P-3.za not affected in this action
....GSR LT Issuer Rating (Local Currency)
published at Ba3 Stable
....GSR ST Issuer Rating (Local Currency)
published at NP
-----------
Issuer: Real People Investment Holdings (Pty) Ltd
....NSR LT Issuer Rating (Local Currency)
repositioned to B3.za from Ba3.za
....NSR ST Issuer Rating (Local Currency)
at NP.za not affected in this action
....GSR LT Issuer Rating (Local Currency)
published at B3 Negative
....GSR ST Issuer Rating (Local Currency)
published at NP
-----------
Issuer: Mauritius Commercial Bank Limited
....NSR LT Senior Unsecured MTN (Foreign Currency)
repositioned to Aa3.za from A3.za
....NSR LT Subordinate MTN (Foreign Currency)
repositioned to Baa1.za from Baa2.za
....GSR LT Senior Unsecured MTN (Foreign Currency)
published at (P)Baa3
....GSR LT Subordinate MTN (Foreign Currency)
published at (P)Ba2
-----------
Issuer: Grindrod Bank Limited
The following NSRs were withdrawn for business reasons:
....NSR LT Issuer Rating (Local Currency)
of Baa3.za
....NSR ST Issuer Rating (Local Currency)
of P-3.za
RATINGS RATIONALE
NSRs are assigned by applying the published correspondence from GSRs.
Where a single GSR maps to multiple NSRs, rating committees assigned
higher or lower NSRs to individual issuers and debts depending on their
relative credit position within the same GSR category, using the
same methodologies as were used to determine the GSRs themselves.
-- FirstRand Bank repositioned at Aaa.za due to its
stronger credit metrics, while other large South African banks are
repositioned at Aa1.za
The rating agency said that it repositioned FirstRand Bank's (FRB)
national-scale deposit and senior debt ratings to Aaa.za
from A1.za previously, in view of the bank's stronger
financial fundamentals and credit metrics relative to its local peers.
All other large banks' (Standard Bank of South Africa, ABSA
Bank Limited, Nedbank Limited and Investec Bank Ltd.) national-scale
deposit ratings were repositioned at Aa1.za from A1.za.
FRB has been the strongest performer within its peer group in the last
few years, and has the highest cushions to protect its credit profile
from the current economic headwinds in South Africa.
FRB's capitalization is the highest among its peers with a CET1
ratio of 13.6% as of December 2015, and an overall
provisioning coverage of NPLs (including portfolio provisions) of a high
83.8% combined with the lowest NPL ratio of 2.3%.
In addition, the bank's return on assets (RoA) of 1.57%
as of December 2015, although down from 1.65% in December
2014, provides a sufficient earnings cushion to absorb potentially
higher credit impairments during 2016-17.
RATIONALE FOR THE WITHDRAWAL OF GRINDROD BANK LIMITED
Moody's has withdrawn the rating for its own business reasons.
Please refer to the Moody's Investors Service's Policy for Withdrawal
of Credit Ratings, available on its website, www.moodys.com.
WHAT COULD CHANGE THE RATINGS -- UP AND DOWN
The NSRs would face upward or downward pressure if their corresponding
GSRs are upgraded or downgraded, unless this is in conjunction with
a sovereign rating action that results in another recalibration of the
South African national scale with an offsetting impact on NSRs.
In addition, the NSRs may be repositioned upwards (downwards) if
South Africa's sovereign is downgraded (upgraded) and the map is
revised accordingly, but the corresponding GSRs have not changed
as a result of the sovereign action. Because of the higher granularity
of national scales, NSRs may also face pressure due to changes in
creditworthiness that are not sufficient to cause a change in the corresponding
GSR, measured using the same methodologies used to determine the
GSR.
METHODOLOGIES USED
The principal methodology used in rating Bidvest Bank Limited, Mercantile
Bank Limited, Sasfin Bank Limited, Standard Bank of South
Africa, FirstRand Bank Limited, ABSA Bank Limited, Nedbank
Limited, Investec Bank Ltd., and Mauritius Commercial
Bank Limited was Banks published in January 2016. The principal
methodology used in rating Real People Investment Holdings (Pty) Ltd was
Finance Companies published in October 2015. Please see the Ratings
Methodologies page on www.moodys.com for a copy of these
methodologies.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn"
country modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in May 2016 entitled "Mapping National Scale Ratings
from Global Scale Ratings". While NSRs have no inherent absolute
meaning in terms of default risk or expected loss, a historical
probability of default consistent with a given NSR can be inferred from
the GSR to which it maps back at that particular point in time.
For information on the historical default rates associated with different
global scale rating categories over different investment horizons,
please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_189530.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead analyst and the Moody's legal entity that has issued the ratings.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Nondas Nicolaides
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Cyprus Ltd.
Porto Bello Building
1, Siafi Street, 3042 Limassol
PO Box 53205
Limassol CY 3301
Cyprus
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Sean Marion
Managing Director
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Cyprus Ltd.
Porto Bello Building
1, Siafi Street, 3042 Limassol
PO Box 53205
Limassol CY 3301
Cyprus
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Recalibrates South Africa's National Rating Scale and Repositions National-Scale Ratings of Banks and Financial Institutions
