Moody's downgrades SA's big 5 banks

2012-10-04 07:59

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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  • Angela - 2012-10-04 08:32

    From the same folk that gave AAA to the banks that plunged us into a worldwide financial crisis that saw pensions and saving wiped out. AAA rating to a bunch of banks that make Robert Mugabe look like an economic whizz kid. Huge credibility gap that no amount of BS from politicians is going to bridge.

  • - 2012-10-04 09:14

    What do theese moody's people know and why are there words so important? did they even have the slightest idea of lehman brothers or the recession ? surely that dolphin that picked the world cup winners is more qualified to make these ratings suggestions

  • rajesh.sukha - 2012-10-04 09:15

    I agree angela...thus far our banks have weathered the economic crisis with flying colours....the ratings are highly subjective.

  • pieter.pretorius.106 - 2012-10-04 09:45

    Seems like everything in SA gets downgraded. Don't take it out on Juju, he is just following in the footsteps of his hero, Mugabe, in his struggle to stuff up everything big time, to make everybody in the country equally poor while he baths in golden baths filled with french champagne.

  • neil.harris.370177 - 2012-10-04 09:51

    Fin24 please report on something relevant for once and leave this hogwash aside. US rating agencies are the most useless and biased firms on the planet. Your Moodys and S&P rated AIG and Lehman Brothers as AAA and downgraded them to only AA minutes before they were collapsing. Bloody joke, the only thing a bad rating does is affects the interest rates at which our banks may borrow (i.e. now we are charged more for our loans than before)

  • neil.harris.370177 - 2012-10-04 10:10

    "Credit rating agencies assess and label the riskiness of financial instruments (AAA being the best). As a recent New Yorker piece by James Surowiecki details, a problem arises because the rating agencies are privately owned and yet the S.E.C. anointed three of them as official ratings agencies—thus instilling a special trust in them by investors. And that was forty years ago. Today everything—from rules and regulations on financial instruments to interest rates—depends on these ratings. So what happens when these agencies drastically overestimate the soundness of mortgage-backed securities? In part, that is what caused our current economic situation. We have become dependent on the accuracy of the ratings, and yet the agencies that issue them are unregulated and are far from objective. I must commend Mr. Surowiecki for this insight. When the agencies gave mortgage-backed securities a rating of AAA, investment flooded to them, creating the all-too-famous housing bubble. When, in light of the housing crash, the agencies harshly downgraded the securities, it drastically accelerated the bursting of the bubble."

      dylan.sciarappa - 2012-10-04 10:28

      It's corruption at the very highest levels

  • Daniel Mah - 2012-10-04 10:16

    maybe its high time these 3 useless agencies get rated as well.

  • stephen.j.dickson.3 - 2012-10-04 13:17

    I hope this makes Standard and ABSA collapse, the no-good bunch of useless,thieving mongrels with standards of service so low they have trouble keeping up.

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