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Moody's downgrades SA's big 5 banks

Oct 04 2012 07:59
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Johannesburg - Ratings agency Moody’s announced on Thursday that it has downgraded SA’s five biggest banks’ foreign deposit ratings due to the revision of the country's foreign currency deposit ceiling to Baa1 from A3 previously.

“Today's rating actions were prompted by the weakening of the South African government's credit profile‚ as captured by Moody's downgrade of SA's government bond rating to Baa1 (negative) from A3 on 27 September 2012; and the high sovereign exposure of the five largest South African banks‚” Moody’s said in a statement on Thursday.

Standard Bank Group [JSE:SBK]‚ Absa Group [JSE:ASA]‚ FirstRand [JSE:FSR]‚ Nedbank Group [JSE:NED] and Investec [JSE:INL] foreign-currency deposit now stands at Baa1 from its previously held A3 rating.

“All five aforementioned banks‚ in addition to African Bank Limited‚ carry negative outlooks on their local-currency deposit and debt ratings‚ in line with the sovereign rating outlook‚” the agency said.

Moody’s said that any indication of a weakening of the SA 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.

“A possible deterioration in the banks' financial performance could also trigger a rating downgrade of both their standalone and deposit ratings‚” the agency said.

It added that there is little likelihood of any upwards rating momentum over the next 12 months. “Moody's believes that systemic support for the banks covered by today's announcement will not increase during this timeframe and that the banks' standalone credit assessments are unlikely to strengthen sufficiently in the currently challenging economic environment to generate upwards ratings pressure‚” Moody’s said.

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moody's  |  banks


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