Moody’s might cut five South African banks

Moody's Investors Service said it placed the Baa3 long-term local- and foreign-currency deposit ratings of Standard Bank of South Africa Ltd., FirstRand Bank Ltd., Absa Bank Ltd., Nedbank Ltd. and Investec Bank Ltd. on review for downgrade.

The agency also placed on review for downgrade the Ba1 long-term local- and foreign-currency issuer ratings of Standard Bank Group Ltd. and Barclays Africa Group Ltd.

The long-term national-scale ratings (NSRs) for these banks were also placed on review for downgrade, while Mercantile Bank Ltd.’s Baa1.za/P-2.za national-scale issuer ratings were placed on review for upgrade.

Moody’s said the review was driven primarily by: (a) The potential weakening of the South African government's credit profile, as captured by Moody's recent decision to place South Africa's Baa3 government bond ratings on review for downgrade, which affects the banks through their sizable holdings of sovereign debt securities, inevitably linking their creditworthiness to that of the national government; and (b) the challenges the banks face in the operating environment in view of weak economic growth in South Africa, which poses the risk of further undermining consumer and investor confidence, increasing asset price volatility and funding costs.

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