Moody’s place five SA banks on review for downgrade

JOHANNESBURG – Ratings agency Moody’s Investors on Wednesday announced that it has placed Absa, First Rand Bank, Standard Bank, Investec and Nedbank under review for downgrade of the Baa3 long-term local and foreign currency deposit ratings.

The agency also confirmed that it further placed the Standard Bank Group Limited and Barclays Africa Group Limited on review for downgrade of the Ba1 long-term local and foreign currency issuer ratings.

The agency said all reviews are based on a variety of factors, including the potential weakening of the South African government’s credit profile and challenges faced by banks amid weak economic growth.

According to the agency, the weak economic growth poses the risk of further undermining consumer and investor confidence, thereby increasing asset price volatility and funding costs.

“As part of the review process, the rating agency will take into consideration the likely impact on banks’ asset quality, securities holdings valuations, and funding costs in light of the potential downgrade of the sovereign rating to non-investment grade…,” Moody’s said in a statement.

The statement further highlights how weaker macro profile or further deterioration in the creditworthiness of South Africa could result in downgrades in the above mentioned financial institution’ ratings.

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