Moody's cuts South African banks

Moody's Investors Service said it downgraded by one notch the foreign-currency deposit ratings of the five largest South African banks to Baa1 from A3. The affected banks are Standard Bank of South Africa, Absa Bank Ltd., FirstRand Bank Ltd., Nedbank Ltd. and Investec Bank Ltd.

The agency said it also downgraded Standard Bank of South Africa's standalone bank financial strength rating and local-currency deposit rating by one notch to C- from C and to A3 from A2, respectively. Additionally, Investec Bank Ltd's local-currency deposit rating was downgraded to Baa1 from A3.

All five aforementioned banks, in addition to African Bank Ltd., carry negative outlooks on their local-currency deposit and debt ratings, in line with the sovereign outlook.

Moody's said the rating actions were prompted by the weakening of the South African government's credit profile, as captured by Moody's downgrade of South Africa's government bond rating to Baa1 from A3; and the high sovereign exposure of the five largest South African banks, comprising on average more than 150% relative to their Tier 1 capital, which links their creditworthiness to that of the national government and constrains their standalone ratings to the sovereign rating level.

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