Fitch Ratings has downgraded the Long-Term Issuer Default Ratings (IDRs) of five South African banks - Absa Bank Limited, FirstRand Bank Limited, Investec Bank Limited, Nedbank Limited and The Standard Bank of South Africa Limited - to 'BB-' from 'BB' and Viability Ratings (VRs) to 'bb-' from 'bb'. The Outlook on all IDRs is Negative.
Fitch has also downgraded the Long-Term IDRs and VRs of four South African bank holding companies - Absa Group Limited, Investec Limited, Nedbank Group Limited and Standard Bank Group Limited. All debt ratings on the international scale have also been downgraded by one notch.
The rating actions follow Fitch's downgrade of the sovereign's Long-Term IDRs to 'BB-' from 'BB' on 20 November 2020 (see: Fitch Downgrades South Africa to 'BB-'; Outlook Negative at www.fitchratings.com). Fitch considers that the South African banks cannot be rated above the South African sovereign given the high concentration of their activities within South Africa and significant sovereign exposure (dominated by government debt but also includes that of public-sector corporates) ranging between 175% and 245% of the banks' capital at end-June 2020.
The Negative Outlooks on the banks'/groups' Long-Term IDRs are aligned with the Negative Outlook on the sovereign rating.
Fitch has also downgraded the five banks' Support Ratings (SR) to '4' from '3' and revised their Support Rating Floors (SRF) down to 'B+' from 'BB-'. This reflects the sovereign's reduced ability to provide support, in case of need, due to a weakening fiscal position.
The National Ratings, including those assigned to senior unsecured and Tier 2 debt issues, are unaffected by this rating action.
