Fitch Ratings has downgraded Barclays Africa Group Limited (BAGL) and Absa Bank Limited's (Absa) foreign currency Long-term Issuer Default Ratings (IDR) to 'BBB-' from 'BBB' and the local currency Long-term IDRs to 'BBB-' from 'BBB+'. A full list of rating actions is at the end of this rating action commentary.
The downgrades follow the announcement by BAGL's parent, Barclays PLC's (Barclays; A/Stable) of the sale of its African operations. Barclays holds a 62.3% stake in BAGL.
The downgrades reflect Fitch's view that there is a lower support propensity from Barclays for BAGL and Absa given the parent's intention to sell its controlling stake in BAGL (which fully owns South African domestic bank, Absa) and deconsolidate the subsidiary (from both an accounting and regulatory perspective) over two to three years.
Fitch does not exclude the possibility of Barclays providing support to BAGL and/or Absa in case of need while it maintains a meaningful ownership share and management control. However, we consider BAGL and Absa to be of limited strategic importance to Barclays and are unable to fully rely on any potential institutional support from the parent for the subsidiaries' ratings.
Consequently, we have downgraded BAGL and Absa to 'BBB-', which reflects their respective financial strength and standalone creditworthiness, as defined by their Viability Ratings (VRs) of 'bbb-'.
