Affirms all ratings of FirstRand Bank and Nedbank and withdraws the outlooks assigned to their subordinated debt and junior instrument ratings
Limassol, June 23, 2015 -- Moody's Investors Service has today assigned Counterparty Risk (CR) Assessments
to six South African banks. It has assigned CR Assessments of Baa1(cr)/P-2(cr)
to Standard Bank of South Africa, FirstRand Bank Limited,
ABSA Bank Limited, Nedbank Limited and Investec Bank Limited,
and Ba1(cr)/NP(cr) to Capitec Bank Limited. This announcement follows
the publication of Moody's new bank rating methodology published
on 16 March 2015 (see "Banks," http://www.moodys.com/viewresearchdoc.aspx?docid=PR_320662).
The rating agency has also affirmed all ratings assigned to FirstRand
Bank Limited and Nedbank Limited and has withdrawn the stable outlook
on their subordinated debt and junior instrument ratings for Moody's
own business reasons. Please refer to Moody's Investors Service's
Policy for Withdrawal of Credit Ratings, available on its website,
www.moodys.com. Outlooks, which provide an
opinion on the likely rating direction over the medium term, are
now assigned only to long-term deposit and issuer/senior unsecured
debt ratings.
Please refer to the end of this press release for a full list of affected
ratings and assessments.
RATINGS RATIONALE
COUNTERPARTY RISK ASSESSMENTS
Moody's has assigned CR Assessments of Baa1(cr)/P-2(cr) to Standard
Bank of South Africa, FirstRand Bank Limited, Absa Bank Limited,
Nedbank Limited and Investec Bank Limited, and Ba1(cr)/NP(cr) to
Capitec Bank Limited. CR Assessments are opinions of how counterparty
obligations are likely to be treated if a bank fails, and are distinct
from debt and deposit ratings in that they (1) consider only the risk
of default rather than expected loss and (2) apply to counterparty obligations
and contractual commitments rather than debt or deposit instruments.
The CR Assessment is an opinion of the counterparty risk related to a
bank's covered bonds, contractual performance obligations (servicing),
derivatives (e.g., swaps), letters of credit,
guarantees and liquidity facilities.
The CR Assessment takes into account the issuer's standalone strength
as well as the likelihood of affiliate and government support in the event
of need, reflecting the anticipated seniority of these obligations
in the liabilities hierarchy. The CR Assessment also incorporates
other steps authorities can take to preserve the key operations of a bank
should it enter a resolution.
For South African banks, which are yet to be subject to an official
operational resolution regime, the CR Assessment is positioned (prior
to government support) one notch above the adjusted baseline credit assessment
(BCA) and therefore above senior unsecured and deposit ratings,
reflecting Moody's view that its probability of default is lower
than that of senior unsecured debt and deposits. Moody's
believes that senior obligations represented by the CR Assessment will
be more likely preserved in order to limit contagion, minimise losses
and avoid disruption of critical functions.
The CR Assessment does not benefit from any government support,
in line with our support assumptions on deposits and senior unsecured
debt.
RATING AFFIRMATION AND OUTLOOK WITHDRAWAL
Moody's has also affirmed all ratings assigned to FirstRand Bank
Limited and Nedbank Limited (please see relevant list below), including
their BCAs of baa2, driven by their sound financial fundamentals,
robust capital base and satisfactory performance during 2014. The
banks' BCA is consistent with Moody's new scorecard outcome
that caps the BCA at South Africa's sovereign rating of Baa2,
which is also driven by the banks' relatively high sovereign exposure,
mainly caused by their liquidity requirements in the form of government
securities. Concurrently, the rating agency has withdrawn
the stable outlook on both banks' subordinated debt and junior instrument
ratings for Moody's own business reasons.
WHAT COULD CHANGE THE RATINGS UP/DOWN
As indicated by the stable outlook assigned to all banks, there
is limited likelihood of any upwards rating momentum over the near-term.
Further positive momentum on the banks' asset quality, profitability
and capital metrics could prove beneficial to their BCA, provided
that the sovereign rating (Baa2 stable) ceases to act as a cap for large
South African banks' BCAs.
Downward rating pressure could emerge if banks' (1) financial performance
-- and specifically asset quality and earnings indicators
-- weaken substantially from current levels; (2) faced
any elevated refinancing risks; and/or (3) key parts of their franchise
and risk management weakened in any way. In addition, the
banks' deposit ratings could also be downgraded if the South African sovereign
rating was to be downgraded from Baa2, with the exception of Capitec
Bank, which is already rated at a lower level.
The principal methodology used in these ratings was Banks published in
March 2015. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
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 June 2014 entitled "Mapping Moody's National
Scale Ratings to Global Scale Ratings".
RATINGS AFFECTED BY TODAY'S ACTION
..Issuer: The Standard Bank of South Africa
-- CR assessment assigned of Baa1(cr)/P-2(cr)
..Issuer: ABSA Bank Limited
-- CR assessment assigned of Baa1(cr)/P-2(cr)
..Issuer: FirstRand Bank Limited
-- CR assessment assigned of Baa1(cr)/P-2(cr)
The following ratings were affirmed:
-- The baseline credit assessment (BCA) and Adjusted BCA
of baa2
-- The P-2 local-currency and foreign-currency
short-term deposit ratings, as well as the P-1.za
national-scale short-term deposit rating
-- The (P)P-2 short-term MTN programme rating
and the P-1.za national-scale short-term rating
-- The commercial paper rating of P-2
-- The Baa2 local-currency and foreign-currency
long-term deposit ratings
-- The (P)Baa2 foreign-currency senior unsecured
EMTN programme rating, and the Baa2 of any issued foreign-currency
senior unsecured debt
-- The (P)Baa2 local-currency senior unsecured domestic
MTN programme rating
-- The A1.za national-scale long-term
deposit rating and the national-scale senior unsecured MTN programme
ratings
-- The (P)Ba1 local-currency junior subordinated
MTN programme rating, as well as the Baa3 of any issued local-currency
legacy subordinated debt and the Ba1(hyb) junior subordinated debt
-- The A2.za national-scale ratings for legacy
subordinated debt and the A3.za national-scale junior subordinated
MTN program rating. The A3.za(hyb) for any issued national-scale
junior subordinated debt
-- The (P)Ba1 local-currency Basel III-compliant
subordinated debt ratings of the bank's domestic MTN programme,
as well as the Ba1 for any issued local-currency Basel III-compliant
subordinated
-- The (P)Ba1 foreign-currency subordinated MTN programme
rating
-- The A3.za national-scale ratings for Basel
III-compliant subordinated MTN program rating, and any issued
national-scale Basel III-compliant subordinated debt
-- The long-term global scale deposit and senior
debt ratings have a stable outlook, while the stable outlook for
any subordinated debt and junior instruments is withdrawn
..Issuer: Nedbank Limited
-- CR assessment assigned of Baa1(cr)/P-2(cr)
The following ratings were affirmed:
-- The baseline credit assessment (BCA) and Adjusted BCA
of baa2.
-- The P-2 local-currency and foreign-currency
short-term deposit rating, as well as the P-1.za
national-scale short-term deposit rating
-- The Baa2 local-currency and foreign-currency
long-term deposit ratings
-- The (P)Baa2 foreign-currency senior unsecured
EMTN programme
-- The (P)Baa3 foreign-currency legacy subordinated
EMTN programme rating, as well as the Baa3 for any issued foreign-currency
legacy subordinated debt
-- The A2.za national-scale legacy subordinated
MTN rating, and the Baa1.za(hyb) hybrid Tier 1 rating
-- The A1.za national-scale long-term
deposit rating and the national-scale senior unsecured MTN rating
-- The long-term global scale deposit and senior
debt ratings have a stable outlook, while the stable outlook for
any subordinated debt and junior instruments is withdrawn
..Issuer: Investec Bank Ltd
-- CR assessment assigned of Baa1(cr)/P-2(cr)
..Issuer:Capitec Bank Ltd
-- CR assessment assigned of Ba1(cr)/NP(cr)
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 rating action on the support provider and in relation to each particular
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 rating action, and
whose ratings may change as a result of this 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 following information supplements Disclosure 10 ("Information
Relating to Conflicts of Interest as required by Paragraph (a)(1)(ii)(J)
of SEC Rule 17g-7") in the regulatory disclosures made at
the ratings tab on the issuer/entity page on www.moodys.com
for each credit rating as indicated:
Moody's was not paid for services other than determining a credit
rating in the most recently ended fiscal year by the person(s) that paid
Moody's to determine this credit rating.
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.
Kanika Business Centre
319 28th October Avenue
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.
Kanika Business Centre
319 28th October Avenue
PO Box 53205
Limassol CY 3301
Cyprus
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns counterparty risk assessments to six South African banks
