Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Enter the above code here:
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Rating Action:

Moody's downgrades South African banks, concluding review focusing on systemic support assumptions

Global Credit Research - 28 Feb 2012

Limassol, February 28, 2012 -- Moody's Investors Service has today downgraded by one notch the senior debt and deposit ratings of five South African banks: Standard Bank of South Africa, Absa Bank Limited, FirstRand Bank Limited, Nedbank Limited, and Investec Bank Ltd. The downgrades reflect the impact of the country's increasingly constrained public finances and Moody's view that authorities would face challenging policy choices if multiple institutions were to need its financial support at the same time. The downgrades are part of Moody's global assessment of the systemic support levels incorporated in banks' deposit and debt ratings, which addresses the growing difficulties governments face in extending systemic support to their banking systems.

Today's rating action is not driven by a deterioration in the standalone financial strength or the financial performance of these five institutions and concludes Moody's review for downgrade of these banks, initiated on 10 November 2011 (please see "Moody's reviews five South African banks for downgrade" for more information).

In addition, Moody's also downgraded by one notch the subordinated debt instruments of the above-mentioned banks, in addition to African Bank Limited's EMTN subordinated debt programme ratings. These downgrades reflect the removal of systemic support assumptions from the subordinated debt instruments of South African banks, prompted by Moody's expectation that authorities will likely make greater use of their resolution tools to allow burden sharing with subordinated bondholders.

A full list of banks' ratings affected by this action is provided at the end of this announcement.

RATINGS RATIONALE

REASSESSMENT OF SYSTEMIC SUPPORT

Moody's reassessment of the support environment assumes a reduced capacity of the South African authorities to provide support to financial institutions if needed. This reduced capacity is also signalled by the negative outlook on South Africa's A3 rating (please see "Moody's changes outlook on South Africa's A3 government ratings to negative from stable" dated 9 November 2011 for more information), which reflects the potential of increased pressure on the government's finances. The reassessment is in line with recent global trends, where sovereigns dealing with a systemic banking crisis possess more limited options and face constrains in providing financial support.

The change in systemic support assumptions has resulted in the reduction of systemic support rating uplift to one notch from two notches before, for the five largest South African banks. Despite the South African government's more constrained financial flexibility to absorb banking-related contingent liabilities under a tail-risk scenario, Moody's believes that systemic support is still warranted in the banks' ratings as the authorities have sufficient powers to intervene, despite some constraints.

In addition, Moody's does not foresee any meaningful political resistance from either the government or the electorate that would compromise in any significant way SARB's willingness and ability to support the banking system. Moody's also believes that the five largest South African banks are systemically important institutions for the country's payment system, and that authorities would be willing to support them if required.

REMOVAL OF SYSTEMIC SUPPORT FROM SUBORDINATED DEBT

Moody's has also removed systemic support from the subordinated debt instruments of South African banks. The rating action was prompted by the rating agency's view that systemic support may not be extended to these instruments in case of financial distress. Subordinated debt is typically recognised in banks' capital structure as Tier 2 capital, and we expect South African authorities to make greater use of their resolution tools to allow burden sharing with subordinated bondholders.

Subordinated debt is now rated one notch lower than a bank's standalone rating or adjusted standalone rating in the case of Absa Bank that incorporates parental support, while any undated junior subordinated debt is rated two notches below the standalone rating or adjusted standalone rating.

ABSA BANK

Following the adjustment in Absa Bank's ratings to reflect the lower systemic support, Absa Bank's ratings have been left on review, in line with the review for downgrade of the standalone ratings of its parent, Barclays Bank (owns 55.5% of Absa Bank), announced on 15 February 2012 (please see "Moody's Reviews Ratings for European Banks" for more information). The review indicates that Barclay's A3 standalone credit strength, as reflected by its BFSR of C, could be lowered to either the same level as Absa's Baa1 standalone credit strength, or lower.

Consequently, Moody's will review the parental support incorporated in Absa's ratings, following the conclusion of Barclay's standalone rating review and an assessment of its financial capacity to support its African subsidiary if required. Moody's notes that Absa's ratings currently benefit from one notch of rating uplift due to parental support from a financially stronger parent bank, which may no longer be the case going forward.

Moody's also acknowledges that Absa, which accounts for approximately 10% of Barclays group's total revenues, will continue to benefit from and leverage the banking and operational expertise available from the parent bank. Furthermore, Absa remains a self-sufficient and operationally independent entity without any funding dependence from Barclays.

WHAT COULD MOVE THE RATINGS UP/DOWN

Any indication of a weakening of the South African authorities' willingness to support any of the above-mentioned banks or any significant deterioration in their capacity to extend financial support, could negatively affect the banks' deposit and debt ratings.

Moody's believes there is little likelihood of any upward rating momentum driven by increased systemic support for the banks covered by today's announcement, or from a strengthening of their stand-alone credit assessments in the currently challenging economic environment.

METHODOLOGY USED

The principal methodologies used in this rating were Bank Financial Strength Ratings: Global Methodology, published in February 2007, and Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology, published in March 2007. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

RATINGS AFFECTED BY TODAY'S ACTION

Standard Bank of South Africa

-- The global local currency (GLC) long-term deposit rating has been downgraded to A2 from A1 and has been assigned a negative outlook, in line with the outlook of the A3 sovereign rating. This implies that a possible downgrade of the sovereign rating, which would also trigger lowering our systemic support assumptions for South Africa, is likely to affect the bank's GLC long-term deposit rating as well.

-- The C BFSR (stable outlook), the P-1 local-currency short-term deposit rating, the A3 long-term foreign-currency deposit rating (negative outlook) and the P-2 short-term foreign-currency deposit rating, all remain unaffected

Absa Bank Limited

-- The GLC long-term deposit rating and the long-term national-scale deposit rating have been downgraded to A2 and Aa2.za, from A1 and Aa1.za respectively and have been both left on review for possible downgrade.

-- With regards to the bank's EMTN programme, the provisional foreign-currency senior unsecured debt rating has been downgraded to (P)A2 from (P)A1. Any issued foreign-currency senior unsecured debt has been downgraded to A2 from A1. The provisional foreign-currency subordinated and junior subordinated debt ratings under its EMTN programme have also been downgraded to (P)Baa1 and (P)Baa2, from (P)A2 and (P)Baa1 respectively. All ratings have been left on review for possible downgrade.

-- The C- BFSR (stable outlook), the P-1 short-term local-currency deposit rating, the A3 long-term foreign-currency deposit rating (negative outlook), the P-2 short-term foreign-currency deposit rating and the P-1.za national-scale short-term deposit rating, all remain unaffected.

United Towers (Proprietary) Ltd [subsidiary and preference shares vehicle of Absa Bank Limited]

-- The long-term national-scale issuer rating has been downgraded to A1.za from Aa3.za, due to the downgrade of the parent bank's GLC long-term deposit rating that guarantees United Towers' preference share obligations. The rating was also placed on review for possible downgrade.

-- The P-1.za short-term national-scale issuer rating remains unaffected.

FirstRand Bank Limited

-- The GLC deposit ratings have been downgraded to A3/P-2 (stable outlook) from A2/P-1. The long-term national-scale deposit rating of Aa2.za has been confirmed.

-- With regards to the bank's EMTN programme, the foreign-currency senior unsecured debt rating has been downgraded to (P)A3 (stable outlook), from (P)A2. Any issued foreign-currency senior unsecured debt has been downgraded to A3 (stable outlook), from A2.

-- The foreign-currency commercial paper has been downgraded to P-2 from P-1.

-- With regards to the bank's domestic MTN programme, the provisional local-currency senior unsecured debt rating has been downgraded to (P)A3 (stable outlook) from (P)A2. The provisional local-currency subordinated and junior subordinated debt ratings have also been downgraded to (P)Baa2 and (P)Baa3 (both with stable outlook), from (P)A3 and (P)Baa2 respectively. The provisional short-term local-currency rating has been downgraded to (P)P-2 from (P)P-1. The Aa2.za national-scale rating for senior unsecured debt has been confirmed. The national-scale rating for subordinated debt and for junior subordinated debt have been downgraded to A1.za and A2.za, from Aa3.za and A1.za respectively. Any issued local-currency junior subordinated debt has been downgraded to Baa3(hyb) (stable outlook) from Baa2(hyb), and any national-scale junior subordinated debt has been downgraded to A2.za(hyb) from A1.za(hyb).

-- The C- BFSR (stable outlook), the P-1.za national-scale short-term deposit rating, the A3 long-term foreign-currency deposit rating (negative outlook) and the P-2 short-term foreign-currency deposit rating, all remain unaffected.

Nedbank Limited

-- The GLC deposit ratings have been downgraded to A3/P-2 (stable outlook) from A2/P-1. The Aa2.za long-term national-scale deposit rating has been confirmed.

-- With regards to the bank's EMTN programme, the provisional foreign-currency senior unsecured debt rating and the subordinated debt rating have been downgraded to (P)A3 and (P)Baa2 (both with stable outlook), from (P)A2 and (P)A3 respectively. Any issued foreign-currency subordinated debt has been downgraded to Baa2 (stable outlook) from A3.

-- With regards to the bank's domestic MTN programme, the Aa2.za national-scale rating for senior unsecured debt has been confirmed. The national-scale rating for subordinated debt has been downgraded to A1.za from Aa3.za.

-- The C- BFSR (stable outlook), the A3 long-term foreign-currency deposit rating (negative outlook), the P-2 short-term foreign-currency deposit rating, the P-1.za national-scale short-term deposit rating and the national-scale hybrid Tier 1 rating of A3.za(hyb) (stable outlook) remain unaffected.

Investec Bank Ltd

-- The GLC deposit ratings and the long-term national-scale deposit rating have been downgraded to A3/P-2 (stable outlook) and Aa3.za, from A2/P-1 and Aa2.za, respectively.

-- With regards to the bank's EMTN programme, the provisional foreign-currency senior unsecured debt rating and the subordinated debt rating have also been downgraded to (P)A3 and (P)Baa2 (both with stable outlook), from (P)A2 and (P)A3, respectively.

-- The C- BFSR (stable outlook), the A3 long-term foreign-currency deposit rating (negative outlook), the P-2 short-term foreign-currency deposit rating and the P-1.za national-scale short-term deposit rating remain unaffected.

African Bank Limited

-- With regards to the bank's EMTN programme, the provisional foreign-currency subordinated debt rating has been downgraded to (P)Ba1 (stable outlook), from (P)Baa3. The bank does not currently have any outstanding subordinated debt under its EMTN programme.

-- The D+ BFSR (stable outlook), the GLC and foreign-currency deposit ratings of Baa2/P-2 (stable outlook), the long-term senior unsecured debt ratings of Baa2 and (P)Baa2 (stable outlook), and the national-scale deposit ratings of A1.za/P-1.za remain unaffected.

At the end of June 2011, Standard Bank of South Africa Limited had total assets of ZAR837.8 billion (USD122.4 billion), FirstRand Bank Limited had total assets of ZAR616.7 billion (USD90.1 billion) and Nedbank Limited had total assets of ZAR580.1 billion (USD84.8 billion). At the end of September 2011, Investec Bank Limited had total assets of ZAR251.7 billion (USD31.8 billion) and African Bank Limited had total assets of ZAR46 billion (USD5.8 billion). At the end of December 2011, Absa Bank Limited had total assets of ZAR742.4 billion (USD91.2 billion). All banks are headquartered in Johannesburg, South Africa.

Moody's National Scale 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 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 ratings, please refer to Moody's Rating Methodology published in March 2011 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings".

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant 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 relevant 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.

The ratings have been disclosed to the rated entities or their designated agents and issued with no amendment resulting from that disclosure.

Information sources used to prepare the ratings are the following: parties involved in the ratings, and public information.

Moody's considers the quality of information available on the rated entities, obligations or credits satisfactory for the purposes of issuing these ratings.

Moody's adopts all necessary measures so that the information it uses in assigning the ratings is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entities or their related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.

In addition to the information provided below please find on the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued each of the ratings.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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.

Nondas Nicolaides
Vice President - Senior Analyst
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

Yves Lemay
MD - Banking
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 downgrades South African banks, concluding review focusing on systemic support assumptions
No Related Data.

 

© 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATION") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

 


MOODY'S CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS FOR RETAIL INVESTORS TO CONSIDER MOODY'S CREDIT RATINGS OR MOODY'S PUBLICATIONS IN MAKING ANY INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

 


ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

 


All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s Publications.

 


To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

 


To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

 


NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

 


MIS, a wholly-owned credit rating agency subsidiary of Moody’s Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

 


For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for "retail clients" to make any investment decision based on MOODY'S credit rating. If in doubt you should contact your financial or other professional adviser.

© 2014 Moody's Investors Service, Inc., Moody’s Analytics, Inc. and/or their affiliates and licensors. All rights reserved.
Regional Sites: