Moody’s cuts South African banks to negative

Moody's Investors Service said it affirmed the Baa2 long-term deposit and senior debt ratings and changed the corresponding rating outlook to negative from stable, of South African banks Standard Bank of South Africa Ltd., FirstRand Bank Ltd., ABSA Bank Ltd., Nedbank Ltd. and Investec Bank Ltd.

The agency also affirmed Standard Bank Group Ltd.'s Baa3 issuer rating and changed the outlook to negative from stable.

Moody’s said the outlook changes are driven primarily by: (a) the weakening credit profile of the South African government's credit profile, as captured by the Dec. 15 change in South Africa's sovereign rating (Baa2) outlook to negative from stable, as the banks' sizable holdings of sovereign debt securities link their creditworthiness to that of the national government; and, to a lesser extent, by (b) the challenges these banks face in view of weaker economic growth in South Africa, particularly in the context of reduced commodity prices, consumer affordability pressures and still-high consumer debt that will likely lead to increased loan impairments and earnings growth pressure for the banks.

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