TEXT - Fitch cuts South African banks ratings

Tue Jan 15, 2013 12:47pm EST

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(The following statement was released by the rating agency)
    Jan 15 - Fitch Ratings has downgraded the Viability Ratings of Absa Bank
Limited (Absa Bank), FirstRand Bank Limited (FirstRand), Investec Bank Limited
(Investec Bank), Nedbank Limited (Nedbank) and The Standard Bank of South Africa
Limited (SBSA) and their respective rated holding companies following the recent
downgrade of the South African sovereign rating. 
Consequently, the Long-term IDRs of FirstRand, Nedbank and SBSA have been 
downgraded to 'BBB' from 'BBB+' and Investec's IDR has been downgraded to 'BBB-'
from 'BBB'. The downgrade of the sovereign has also resulted in a re-calibration
of the South African National Rating Scale, which has affected several other 
institutions in the country. A full list of rating actions is at the end of this
rating action commentary.

RATING ACTION RATIONALE - MAJOR BANKING GROUPS

The Viability Ratings (VR) of Absa Bank, Absa Group Limited (Absa), FirstRand, 
Investec Bank, Investec Limited (Investec), Nedbank Group Limited (Nedbank 
Group), Nedbank, SBSA and Standard Bank Group Limited (SBG) have been downgraded
by one notch following the one-notch downgrade of South Africa's foreign 
currency IDR to 'BBB'. Absa, FirstRand, Nedbank and SBSA now all have 'bbb' VRs,
while Investec's is one notch lower at 'bbb-'. 

The downgrade of the banks' VRs reflects the five major banks' concentration to 
South Africa, a high proportion of liquid assets invested in government 
securities and a weakening operating environment as indicated by the downgrade 
of the sovereign rating. The sovereign rating is now effectively acting as a cap
on these banks' VRs at this rating level because of their strong links with 
South Africa.

Absa and Absa Bank's Issuer Default Ratings (IDR) are driven by the ratings of 
55.5%-parent, Barclays Bank Plc (Barclays, 'A'/Stable) and have been affirmed at
'A-'. Absa's and Absa Bank's IDRs are notched once from Barclays' rating, 
reflecting Fitch's view of Absa and Absa Bank as strategically important 
subsidiaries. The IDRs of the other major banks are all driven by their VRs and 
have been downgraded in line with these ratings.

The National Ratings of the major banking groups, excluding Absa have been 
affirmed while Absa's and Absa Bank's National Long-term ratings have been 
upgraded to 'AAA(zaf)'. National ratings reflect the creditworthiness of an 
issuer relative to the best credit in the country. Because the downgrades of the
local currency IDRs of the major banking groups, excluding Absa, are driven by 
the weakening operating environment, their relative creditworthiness has not 
weakened. Because Absa and Absa Bank's IDRs were not affected by the sovereign 
downgrade, they now map to a higher level on the South African National Scale.

 

RATING ACTION RATIONALE - STANDARD BANK BRANCHES AND SUBSIDIARIES

The IDRs of Standard Bank Plc (SB Plc), a 100% UK subsidiary of SBG, have been 
downgraded in line with the downgrade of SBG's ratings. SB Plc's IDRs are 
equalised with SBG's due to Fitch's assessment of it as a core subsidiary. SB 
Plc's Support Rating (SR) of '2' reflects Fitch's view of a high probability of 
support from SBSA in view of SBG's 100%-ownership of both entities and the 
group's written commitment to support its banking subsidiaries.

The National Ratings of SBSA, Taipei branch have been downgraded to Long-term 
'A+(twn)' and Short-term 'F1(twn)', from 'AA-(twn)' and 'F1+(twn)'. SBSA, Taipei
Branch is a branch of SBSA and consequently its National Ratings are driven by 
SBSA's local currency IDR. The Outlook is Stable. 

The IDRs and National Ratings of CfC Stanbic Bank Limited (CfC Stanbic, Kenyan 
subsidiary) and National Ratings of Stanbic IBTC Bank Plc (Stanbic IBTC, 
Nigerian subsidiary) have been affirmed. CfC Stanbic's VR is unaffected by this 
rating action.

RATING ACTION RATIONALE - SANLAM LIMITED SUBSIDIARIES

The National Ratings of Sanlam Capital Markets Limited (SCM) and parent Genbel 
Securities Limited (Gensec) have been affirmed and are driven by support from 
ultimate parent Sanlam Limited (Sanlam) in line with Fitch's assessment of these
entities as core subsidiaries of Sanlam. SCM's guaranteed obligations relate to 
most of SCM's trading obligations and benefit from a direct guarantee from 
Sanlam. The guaranteed obligations are equalised with Sanlam's National Ratings.
The ratings of these entities would be sensitive to any change in Sanlam's 
ratings. The Support Rating of '2' assigned to both entities would be sensitive 
to a one-notch downgrade of Sanlam's ratings or if there was a change in 
Sanlam's willingness to support these entities.

RATING ACTION RATIONALE - STATE-OWNED DFIs

The National Ratings of the Development Bank of Southern Africa (DBSA) and Land 
and Agricultural Bank of South Africa (Land Bank) are derived from the support 
these entities enjoy as state-owned development finance institutions, 
incorporated by Acts of Parliament.

DBSA's National Long-term rating has been downgraded to 'AA+(zaf)' from 
'AAA(zaf)' and its National Short-term rating has been affirmed at 'F1+(zaf)'. 
DBSA's ratings are driven by the sovereign's local currency IDR due to the high 
probability of support from the authorities. The downgrade of South Africa's 
local currency IDR to 'BBB+' means that DBSA's support-driven rating no longer 
maps to the best credit in the country.

Land Bank's National Long-term rating of 'AA(zaf)' and National Short-term 
rating of 'F1+(zaf)' have been affirmed. Land Bank's ratings are notched from 
the sovereign's rating and still map to the same National Ratings. 

RATING ACTION RATIONALE - DEBT ISSUED BY BRANCHES OF FOREIGN ENTITIES

Bank of China Limited (BoC) - Johannesburg Branch's DMTN Programme has been 
affirmed at National Long-term 'AAA(zaf)' and National Short-term 'F1+(zaf)'. 
These ratings are driven by Bank of China's Long-term local currency rating of 
'A'/Stable.

Similarly, the long-term debt issued by Credit Agricole Corporate and Investment
Bank's ('A+'/Negative) South African branch has been affirmed at National 
Long-term 'AAA(zaf)'.

RATING DRIVERS AND SENSITIVITIES - IDRS, NATIONAL RATINGS AND SENIOR DEBT- MAJOR
BANKING GROUPS

The Outlooks on the major South African banking groups IDRs are Stable. In the 
longer term, the VRs of these entities could be sensitive to a material 
weakening of asset quality and long-term earnings potential in an uncertain 
economic environment and/or a reduction in capital. This would also affect the 
IDRs of the major banking groups except Absa whose IDRs are driven by Barclays' 
support. Asset quality could be vulnerable to customer affordability in the 
event of sharp interest rate increases in a tightening cycle. 

If the South African sovereign was downgraded further, Fitch believes that the 
VRs of the major banks could converge. If the VRs of the major banks excluding 
Absa were downgraded, their IDRs would also be downgraded as they are driven by 
the banks' intrinsic strengths.

The IDRs of Absa and Absa Bank could be affected by a change in Barclays' rating
or willingness to provide support or a downgrade of South Africa's Country 
Ceiling of 'A-'.

Upward potential for the ratings is limited in light of a weaker sovereign and 
operating environment. 

The banks' National Ratings are sensitive to their relative creditworthiness 
compared with the best credit in the country and with peers. Negative rating 
action on FirstRand, Investec, Nedbank and Standard Bank would occur if there 
was a material weakening of asset quality and/or capital adequacy relative to 
peers. Absa's National Ratings are sensitive to changes in Barclays' ratings or 
willingness to provide support.  

RATING DRIVERS AND SENSITIVITIES - IDRS, NATIONAL RATINGS AND SENIOR DEBT- 
STANDARD BANK BRANCHES AND SUBSIDIARIES

The ratings of SB Plc are driven by SBG's IDR while SBSA, Taipei Branch's 
National Ratings are driven by the local currency IDRs of SBSA. These ratings 
would be sensitive to any changes to SBG's and SBSA's IDRs.

The Country Ceilings of Nigeria ('BB-') and Kenya ('BB-') are four notches below
SBSA's IDR. The support-driven IDRs of CfC Stanbic and the National Ratings of 
CfC Stanbic and Stanbic IBTC could withstand a downgrade of up to three notches 
of SBG's local currency IDR before they would be affected. 

CfC Stanbic's VR would be sensitive to any reduction in the bank's Fitch core 
capital ratio from current levels. This could occur if risk-weighted asset 
growth outpaced earnings growth in the absence of further capital injections. 
The IDRs would be sensitive to any change in Kenya's sovereign rating and/or a 
change in the willingness of SBG to support CfC Stanbic if required. The 
National Ratings would be sensitive to a change in the perceived level of 
support.  

Stanbic IBTC's National Ratings would be sensitive to a change in the perceived 
level of support. 

RATING DRIVERS AND SENSITIVITIES -NATIONAL RATINGS - STATE-OWNED DFIs

The National Ratings of DBSA and Land Bank would be sensitive to Fitch's 
perception of the South African authorities' willingness or ability to support 
these entities if required.

RATING DRIVERS AND SENSITIVITIES -SENIOR DEBT- DEBT ISSUED BY BRANCHES OF 
FOREIGN ENTITIES

BoC Johannesburg Branch's DMTN Programme's National Ratings are derived by 
mapping Bank of China's IDR of 'A' to the South African National Rating Scale. 
BOC's IDR reflects Fitch's perceived level of support from the Chinese 
authorities if required. The bank's IDR is sensitive to changes in the perceived
ability or willingness of the Chinese government to provide support to the bank.
Any change in BOC's rating would also result in a change in the programme's 
ratings. 

China's sovereign support to its major commercial banks could be sensitive to 
deterioration in the sovereign balance sheet. Other negative drivers may include
significant weakening in economic growth or continued rapid growth of financial 
sector assets relative to GDP.

There is no immediate downward pressure on the National debt ratings of Credit 
Agricole Corporate and Investment Bank (South Africa Branch).

RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR - 
MAJOR BANKING GROUPS

The downgrade of FirstRand, Investec Bank and SBSA's SRs to '3' from '2' and 
SRFs to 'BB+' from 'BBB-'reflect a moderate probability of support from the 
South African authorities following the sovereign downgrade. The SRs and SRFs 
would be sensitive to any perceived reduction in the willingness or ability of 
the South African authorities to support the banks. The SRs ('5') and SRFs 
('NF') of Investec and SBG reflect Fitch's view that support would flow directly
to the operating entities if required.

Nedbank's and Nedbank Group's SRs of '2' are derived from the potential support 
from 52%-parent Old Mutual Plc ('A-'/Negative). Fitch considers that support 
would flow to either entity in the event of need. Similarly, Absa's and Absa 
Bank's SRs of '1' are derived from the extremely high probability of support 
from Barclays if required. 

The SRs of Absa, Absa Bank, Nedbank and Nedbank Group would be sensitive to a 
change in Fitch's perception of the level of support from the respective parents
if required. This could be signified by public statements or a reduction in 
shareholding or an indication of an intention to sell.

RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR - 
STANDARD BANK BRANCHES AND SUBSIDIARIES

SB Plc's SR could be sensitive to SBG's willingness or ability to provide 
support. The support rating of '2' would be sensitive to a two-notch downgrade 
of SBG's IDR.

CfC Stanbic's SR of '3' reflects a moderate probability of support. The SR is 
constrained by Kenya's country ceiling of 'BB-' and could be sensitive to SBG's 
willingness or ability to provide support or to changes to the Kenyan Sovereign 
ratings.

RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR - 
STATE-OWNED DFIs

DBSA's and Land Bank's SRs of '2' would be sensitive to a change in Fitch's 
perception of the sovereign's willingness or ability to support these entities. 

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

Subordinated debt and other hybrid capital issued by FirstRand, Investec Bank, 
Nedbank and SB Plc are all notched down from the VRs of 'bbb' for FirstRand and 
Nedbank, 'bbb-' for Investec Bank and SBSA's VR of 'bbb' for SB Plc in 
accordance with Fitch's assessment of each instrument's respective 
non-performance and relative loss severity risk profiles, which vary 
considerably. Their ratings are primarily sensitive to any change in the VRs. 

A Special Report will shortly be available at www.fitchratings.com with more 
details on the banks discussed in this RAC, followed by credit updates and full 
rating reports on each of the individual banks.

The rating actions are as follows:

Absa Group Limited:

Foreign currency Long-term IDR: affirmed at 'A-'; Outlook Stable

Foreign currency Short-term IDR: affirmed at 'F2'

Local currency Long-term IDR: affirmed at 'A-'; Outlook Stable 

National Long-term rating: upgraded to 'AAA(zaf)' from 'AA+(zaf)'; Outlook 
Stable

National Short-term rating: affirmed at 'F1+(zaf)' 

Viability Rating: downgraded to 'bbb' from 'bbb+'

Support Rating: affirmed at '1' 

Absa Bank Limited:

Long-term foreign currency IDR: affirmed at 'A-'; Outlook Stable

Short-term foreign currency IDR: affirmed at 'F2'

Local currency Long-term IDR: affirmed at 'A-'; Outlook Stable

National Long-term rating: upgraded to 'AAA(zaf)' from 'AA+(zaf)'; Outlook 
Stable

National Short-term rating: affirmed at 'F1+(zaf)'

Viability Rating: downgraded to 'bbb' from 'bbb+'

Support Rating: affirmed at '1'

Senior unsecured debt: Long-term foreign currency rating affirmed at 'A-'; 
Short-term foreign currency affirmed at 'F2' 

Senior unsecured notes National Long-term rating: upgraded to 'AAA(zaf)' from 
'AA+(zaf)'

FirstRand Bank Limited:

Long-term foreign currency IDR: downgraded to 'BBB' from 'BBB+'; Outlook Stable 

Long-term local currency IDR: downgraded to 'BBB' from 'BBB+'; Outlook Stable

Short-term foreign currency IDR: downgraded to 'F3' from 'F2'

Viability Rating: downgraded to 'bbb' from 'bbb+'

Support Rating: downgraded to '3' from '2' 

Support Rating Floor: downgraded to 'BB+' from 'BBB-'

National Long-term rating affirmed at 'AA(zaf)'; Outlook Stable

National Short-term rating affirmed at 'F1+(zaf)'

Senior unsecured notes: Long-term foreign currency rating downgraded to 'BBB' 
from 'BBB+'; Short-term foreign currency downgraded to 'F3' from 'F2'; National 
Long-term rating affirmed at 'AA(zaf)' 

Subordinated notes: affirmed at 'AA-(zaf)'

Upper tier 2 notes: affirmed at 'A(zaf)'

Investec Limited

Long-term foreign currency IDR: downgraded to 'BBB-' from 'BBB'; Outlook Stable

Short-term foreign currency IDR: affirmed at 'F3'

Viability Rating: downgraded to 'bbb-' from 'bbb'

Support Rating: affirmed at '5'

Support Rating Floor: affirmed at 'No Floor' 

Investec Bank Limited

Long-term foreign currency IDR: downgraded to 'BBB-' from 'BBB'; Outlook Stable

Short-term foreign currency IDR: affirmed at 'F3'

Viability Rating: downgraded to 'bbb-' from 'bbb'

Support Rating: downgraded to '3' from '2'

Support Rating Floor: downgraded to 'BB+' from 'BBB-' 

National Long-term rating: affirmed at 'A+(zaf)'; Outlook revised to Stable 

National Short-term rating: affirmed at 'F1(zaf)' 

Senior unsecured debt: Long-term rating downgraded to 'BBB-' from 'BBB', 
Short-term rating affirmed at F3

Basel 3-compliant Tier 2 subordinated debt: affirmed at National Long-term 
rating 'A(zaf)' 

Nedbank Group Limited: 

Long-term foreign currency IDR: downgraded to 'BBB' from 'BBB+'; Outlook Stable 

Long-term local currency IDR: downgraded to 'BBB' from 'BBB+'; Outlook Stable

Short-term foreign currency IDR: downgraded to 'F3' from 'F2'

Viability Rating: downgraded to 'bbb' from 'bbb+'

Support Rating: affirmed at '2'

National Long-term Rating: affirmed at 'AA(zaf)'; Outlook Stable 

National Short-term Rating: affirmed at 'F1+(zaf)' 

Nedbank Limited: 

Long-term foreign currency IDR: downgraded to 'BBB' from 'BBB+'; Outlook Stable

Long-term local currency IDR: downgraded to 'BBB' from 'BBB+'; Outlook Stable

Short-term foreign currency IDR: downgraded to 'F3' from 'F2'

Viability Rating: downgraded to 'bbb' from 'bbb+'

Support Rating: affirmed at '2'

National Long-term Rating: affirmed at 'AA(zaf)'; Outlook Stable 

National Short-term Rating: affirmed at 'F1+(zaf)'

Senior unsecured notes: Long-term rating downgraded to 'BBB' from 'BBB+', 
Short-term rating downgraded to 'F3' from 'F2'

Senior unsecured notes: National Long-term rating affirmed at 'AA(zaf)'

Subordinated notes: downgraded to 'BBB-' from 'BBB'

Standard Bank Group Limited:

Long-term foreign currency IDR: downgraded to 'BBB' from 'BBB+'; Outlook Stable

Long-term local currency IDR: downgraded to 'BBB' from 'BBB+'; Outlook Stable

Short-term foreign currency IDR: downgraded to 'F3' from 'F2'

National Short-term rating: affirmed at 'F1+(zaf)'

Viability Rating: downgraded to 'bbb' from 'bbb+'

Support Rating: affirmed at '5' 

Support Rating Floor: affirmed at 'NF' 

Standard Bank of South Africa Limited:

Long-term foreign currency IDR: downgraded to 'BBB' from 'BBB+'; Outlook Stable

Long-term local currency IDR: downgraded to 'BBB' from 'BBB+'; Outlook Stable

Short-term foreign currency IDR: downgraded to 'F3' from 'F2'

Viability Rating: downgraded to 'bbb' from 'bbb+'

Support Rating: downgraded to '3' from '2'

Support Rating Floor: downgraded to 'BB+' from 'BBB-' 

National Long-term rating: affirmed at 'AA(zaf)'; Outlook Stable

National Short-term rating: affirmed at 'F1+(zaf)'

Senior unsecured debt: Long-term foreign currency rating downgraded to 'BBB' 
from 'BBB+'; Short-term foreign currency downgraded to 'F3' from 'F2'

Standard Bank Plc (UK subsidiary of SBG):

Long-term IDR: downgraded to 'BBB' from 'BBB+'; Outlook Stable

Short-term IDR: downgraded to 'F3' from 'F2'

Support Rating: affirmed at '2'

Senior unsecured debt: Long-term rating downgraded to 'BBB' from 'BBB+', 
Short-term rating downgraded to 'F3' from 'F2'

Subordinated debt: downgraded to 'BBB-' from 'BBB'

Subordinated perpetual notes (XS0262708554): downgraded to 'BB' from 'BB+'

SBSA, Taipei Branch

National Long-term rating: downgraded to 'A+(twn)' from 'AA-(twn)'; Outlook 
Stable

National Short-term rating: downgraded to 'F1(twn)' from 'F1+(twn)'

Stanbic IBTC Bank Plc (Nigerian subsidiary of SBG)    

National Long-term rating: affirmed at 'AAA(nga)'

National Short-term rating: affirmed at 'F1+(nga)'

CfC Stanbic Bank Limited (Kenyan subsidiary of SBG)    

Long-term foreign currency IDR: affirmed at 'BB-'; Outlook Stable 

Short-term foreign currency IDR: affirmed at 'B' 

Viability Rating: unaffected at 'b'

Support Rating: affirmed at '3'

National Long-term rating: affirmed at 'AAA(ken)'

National Short-term rating: affirmed at 'F1+(ken)'

Sanlam Capital Markets Limited: 

National Long-term rating: affirmed at 'A+(zaf)'; Outlook Stable 

National Short-term rating: affirmed at 'F1(zaf)'

Support Rating: affirmed at '2' 

Guaranteed obligations: National Long-term rating affirmed at 'AA-(zaf)'; 
National Short-term rating affirmed at 'F1+(zaf)' 

Genbel Securities Limited: 

National Long-term rating: affirmed at 'A+(zaf)'; Outlook Stable 

National Short-term rating: affirmed at 'F1(zaf)'

Support Rating: affirmed at '2' 

Development Bank of Southern Africa

National Long-term rating: downgraded to 'AA+(zaf)' from 'AAA(zaf)'; Outlook 
Stable

National Short-term rating: affirmed at 'F1+(zaf)'

Support Rating: affirmed at '2'

Land and Agricultural Bank of South Africa

National Long-term rating: affirmed at 'AA(zaf)'; Outlook Stable

National Short-term rating: affirmed at 'F1+(zaf)'

Support Rating: affirmed at '2'

Bank of China Limited - Johannesburg Branch

Senior unsecured DMTN programme:

National Long-term: affirmed at 'AAA(zaf) '

National Short-term: affirmed at 'F1+(zaf)'

Credit Agricole Corporate and Investment Bank (South Africa Branch)

Senior unsecured debt: National Long-term rating affirmed at 'AAA(zaf) '

 (Caryn Trokie, New York Ratings Unit)
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