Fitch Affirms CfC Stanbic Bank at 'BB-'/'AAA(ken)'; Outlook Stable

Fri Jul 4, 2014 12:16pm EDT

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(The following statement was released by the rating agency) LONDON, July 04 (Fitch) Fitch Ratings has affirmed Kenya-based CfC Stanbic Bank Limited's (CfC Stanbic) Long-term Issuer Default Rating (IDR) at 'BB-' and National Long-term rating at 'AAA(ken)', both with Stable Outlooks. The Viability Rating (VR) was also affirmed at 'b'. A full list of rating actions is available at the end of this rating action commentary. KEY RATING DRIVERS - IDRS, SUPPORT RATING AND NATIONAL RATINGS CfC Stanbic's IDRs and National Ratings are driven by a moderate probability of support from the bank's 60%-ultimate parent Standard Bank Group Limited (SBG; BBB/Negative). Fitch considers SBG's willingness to support as high, given a written statement in SBG's annual report that it will support various banking subsidiaries, including CfC Stanbic - except in the case of political risk. However, CfC Stanbic's IDR is constrained by Kenya's Country Ceiling of 'BB-' due to transfer and convertibility risks above this rating level. Fitch considers CfC Stanbic as a strategically important subsidiary of SBG, given high levels of strategic and operational integration, its majority ownership, as well as Kenya's role in SBG's east-Africa strategy. There are high levels of integration in the day-to-day management of risk across the group and Fitch views the reputational risk on SBG of a default by CfC Stanbic as extremely high. However, CFC Stanbic has only a '3' Support Rating, indicating moderate probability of support, as the rating is constrained by Kenya's Country Ceiling. CFC Stanbic's National Ratings reflects Fitch's view of the bank's relative creditworthiness within Kenya. RATING SENSITIVITIES - IDRS, SUPPORT RATING AND NATIONAL RATINGS SBG's Negative Outlook reflects a deteriorating operating environment in South Africa. However, a downgrade of SBG's ratings may not affect CfC Stanbic's ratings. This is because Kenya's Country Ceiling of 'BB-' is four notches below SBG's IDR of 'BBB'. Therefore, we believe that CfC Stanbic's Long-term IDR could withstand a downgrade of up to three notches of SBG's IDR before it would be affected. Fitch always maintains at least a one notch difference between SBG and CfC Stanbic. The IDRs and National Ratings would also be sensitive to a lower perceived willingness of SBG to provide support. The IDRs could also be sensitive to an upgrade of Kenya's Country Ceiling, which could result from a corresponding change in the sovereign rating. KEY RATING DRIVERS - VR CfC Stanbic's VR reflects a challenging operating environment in Kenya. Growth opportunities are hindered by a lack of capital spending by the government and security threats may cause the operating environment to deteriorate further. The VR considers the benefits of the bank's close links to SBG, in terms of its franchise, risk management framework and strategy. The rating also reflects CfC Stanbic's financial metrics, including strong, but potentially volatile earnings given the operating environment. The VR further reflects CFC Stanbic's capital ratios, which are significantly higher than regulatory minimums. However, Fitch considers capital ratios as no more than adequate, particularly in light of high concentrations on both sides of the bank's balance sheet and the general operating environment. RATING SENSITIVITIES - VR The bank's VR is sensitive to erosion of its capital base from a combination of rapid growth and deterioration in asset quality. Larger capital buffers and a reduction in reliance on trading income, which is subject to market conditions, would be positive for the rating. The rating actions are as follows: CfC Stanbic Bank Limited Long-term IDR affirmed at 'BB-'; Outlook Stable Short-term IDR affirmed at 'B' Support Rating affirmed at '3' Viability Rating affirmed at 'b' National Long-term Rating affirmed at 'AAA(ken)'; Outlook Stable National Short-term Rating affirmed at 'F1+(ken)' Contact: Primary Analyst Mahin Dissanayake Director +44 20 3530 1618 Fitch Ratings Limited 30 North Colonnade E14 5GN Secondary Analyst Andrew Parkinson Associate Director +44 20 3530 1420 Committee Chairperson Eric Dupont Senior Director +33 1 4429 91 31 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com. Additional information is available on www.fitchratings.com Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 31 January 2014, are available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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