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Rating Action:

Moody's upgrades Nedbank Private Wealth Limited's deposit ratings to Baa2 from Baa3; outlook stable

15 May 2018

London, 15 May 2018 -- Moody's Investors Service has today upgraded Nedbank Private Wealth Limited's (NPWL's) long-term deposit ratings to Baa2 from Baa3 with a stable outlook. Concurrently the rating agency has upgraded the Baseline Credit Assessment (BCA) and adjusted BCA to baa2 from baa3, the short-term deposit ratings to Prime-2 from Prime-3, and the long-term Counterparty Risk Assessment (CR Assessment) to Baa1(cr) from Baa2(cr). The short-term CR Assessment was affirmed at Prime-2(cr).

This rating action incorporates a change in the Isle of Man's Macro Profile to Strong from Strong+. The Isle of Man Macro Profile was changed to reflect Moody's' view that the business model of banks in the Isle of Man often focus on the collection of deposits from overseas or from institutions such as trusts, which are often on-lent to parent banks, some of which are domiciled in the UK. Since depositor confidence in the Isle of Man could be eroded if parent banks in the UK were to experience significant financial pressures, the Isle of Man Macro Profile is one notch below that of the UK (Strong+).

A full list of affected ratings can be found at the end of this press release.

RATINGS RATIONALE

The upgrade of the BCA to baa2 from baa3 reflects Moody's view that the robustness of NPWL's franchise has improved over the past few years, demonstrated through growth and improved profitability. Since 2013, combined assets under management and assets under administration grew by over 100% and net income to tangible assets increased to 0.8% in 2017 from 0.5% in 2013.

The BCA also reflects NPWL's (i) good capitalisation; (ii) strong liquidity; and (iii) low problem loan ratio, despite some credit concentration. These strengths are balanced against challenges stemming from characteristics of the private banking industry that increase deposit volatility and increase operational risks, particularly given NPWL's relatively limited size.

NPWL's baa2 adjusted BCA incorporates the standalone BCA of baa2 and a high probability of affiliate support from Nedbank Group.

The upgrade of the deposit ratings to Baa2 from Baa3 reflects (i) NPWL's baa2 adjusted BCA; (ii) Moody's Basic Loss Given Failure assessment, resulting in a Preliminary Rating Assessment aligned with the adjusted BCA; and (iii) Moody's' expectation that there is a low probability of government support for the deposits of NPWL.

The stable outlook reflects Moody's view that NPWL's intrinsic credit quality is likely to remain in line with that of a baa2 BCA over the next 12-18 months. During that period, the rating agency expects NPWL's return on assets to remain around 0.8% and that the bank will continue to grow its managed wealth.

WHAT COULD CHANGE THE RATINGS UP/DOWN

The BCA could be upgraded if there were material improvements in (i) profitability, driven by a combination of improved net interest margins and increased fee income; (ii) increasing client deposits, assets under management, and/or assets under administration; and (iii) reduced concentration levels in the loan book.

The BCA could be downgraded if the bank experiences (i) material losses in the loan book or liquidity portfolio; (ii) a material weakening of its capital ratios; (iii) litigation charges that exceed our expectations (for example, in respect of tax or reputational issues); and/or (iv) a material outflow in client deposits, assets under management and/or assets under administration.

A change in the BCA would likely result in a corresponding change to the bank's deposit ratings.

Because NPWL's adjusted BCA incorporates a high probability of affiliate support from the Nedbank Group, a potential downgrade of Nedbank Limited (long-term deposit ratings at Baa3 stable; BCA at baa3) would likely trigger a reassessment of NPWL's BCA but would not necessarily result in a downgrade of its ratings. Conversely, a potential downgrade of NPWL's standalone BCA below that of Nedbank Limited may be offset by affiliate support uplift incorporated into the adjusted BCA.

LIST OF AFFECTED RATINGS

Issuer: Nedbank Private Wealth Limited

Upgrades:

....LT Bank Deposits, Upgraded to Baa2 from Baa3, Outlook remains Stable

....ST Bank Deposits, Upgraded to P-2 from P-3

....Adjusted Baseline Credit Assessment, Upgraded to baa2 from baa3

....Baseline Credit Assessment, Upgraded to baa2 from baa3

....LT Counterparty Risk Assessment, Upgraded to Baa1(cr) from Baa2(cr)

Affirmations:

....ST Counterparty Risk Assessment, Affirmed P-2(cr)

Outlook Actions:

....Outlook, Remains Stable

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Banks published in April 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

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.

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.

Aleksander Henskjold
Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Nicholas Hill
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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