Moody’s has downgraded the long-term local currency deposit ratings of Standard Bank of South Africa (SBSA), Absa Bank, FirstRand Bank and Nedbank from A3 to Baa1.
The long-term national scale deposit ratings were downgraded from Aa2.za to Aa3.za.
The ratings reflect the low probability of the South African government agencies supporting the banks in the hour of need.
Moody’s said: "This updated opinion was prompted, most recently, by the actions taken by the South African Reserve Bank (SARB) in response to the abrupt loss of creditor confidence in African Bank (ABL).
"The policy response addressed related liquidity and capital issues, thereby mitigating contagion risks with the further objective of minimising potential losses.
"However, the inclusion of a bail-in of senior unsecured bondholders and wholesale depositors indicates the regulator’s willingness to impose losses on creditors."
SARB said it did not agree with Moody’s rationale and assessment.
"With a capital adequacy of 14.87%, of which Tier 1 capital comprises 12.05%; a financial leverage multiple of 13.43, impaired advances to gross loans and advances of 3.57% and a return on equity of 14.25%, the South African banking sector remains healthy and robust."
Image: Standard Bank branch at Adderley Street in Cape Town, South Africa. Photo: courtesy of Borisgorelik.
