“Moody’s Investors Service downgraded the long-term deposit and senior debt ratings of the five largest South African banks after the government’s credit profile weakened.
The downgrade to Baa2 with a stable outlook from Baa1 was also driven by “the challenges these banks face in view of weaker economic growth in South Africa, particularly in the context of consumer affordability pressures and still-high consumer indebtedness,” Moody’s said in a statement yesterday. The strain on households “will likely lead to increased credit risks and higher loan impairments for the banks,” it said.
The South African units of Standard Bank Group Ltd. (SBK), Barclays Plc (BARC), FirstRand Ltd. (FSR), Nedbank Group Ltd. (NED) and Investec Plc (INVP) were all affected. Moody’s lowered South Africa’s rating to Baa2 on Nov. 6, citing slower growth and rising debt levels. Baa2 is the second-lowest investment grade.
The banks’ “high sovereign exposure, mainly in the form of government debt securities they hold as part of their liquid assets requirement, links their credit profile to that of the government,” Moody’s said.
The seven-member FTSE/JSE Banks Index rose as much as 0.3 percent to its highest intraday level in almost a week in Johannesburg trading. In August, the index slid to a five week low after Moody’s cut the local-currency debt ratings for the four biggest lenders.”
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