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Fitch Publishes Peer Review of Major South African Banks
March 27, 2017 / 7:09 AM / 9 months ago

Fitch Publishes Peer Review of Major South African Banks

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: South Africa Banks: Peer Review here LONDON, March 27 (Fitch) Fitch Ratings has published a peer review of the five major South African banking groups and domestic banking entities. Together these represented 93% of domestic banking assets and 85% of domestic credit at end-2016. As part of its December 6, 2016 peer rating review, Fitch had affirmed the Long-Term Issuer Default Ratings (IDRs) at 'BBB-' for the following: Absa Bank Limited, Barclays Africa Group Limited (BAGL), FirstRand Bank Limited (FRB), Investec Bank Limited (IBL), Investec Limited (IL), Nedbank Group Limited (NedGroup), Nedbank Limited, The Standard Bank of South Africa Limited (SBSA) and Standard Bank Group Limited (SBG). Fitch does not rate the holding company of FRB, FirstRand Limited. The Outlooks on all Long-Term IDRs were revised to Negative, in line with the sovereign rating (also 'BBB-'). Each of the entities' ratings consider well-developed financial markets and regulation, capable management and sound risk management. The ratings also consider the banks' dominant competitive positions, driving solid profitability and solid asset quality. However, the ratings are constrained by the sovereign rating, given the banks' high exposure to sovereign creditworthiness through their liquid assets portfolios and lending to sovereign-owned enterprises. Fitch views the banks as well-managed institutions, with experienced personnel and good depth. Governance and risk frameworks are sound and in line with those of many developed markets. Underwriting standards have become increasingly conservative through the downward economic cycle. In particular, banks' exposure to unsecured retail lending has reduced significantly. The South African economy is diverse and concentrations are not a concern as they are in many other emerging markets. Weak economic growth in South Africa (estimated 0.3% in 2016) has not prevented the major South African banks from producing good profitability. Earnings are supported by diverse business models and strong franchises. However, it is clear that earnings growth is slowing due to slower loan growth. Loan impairment charges are also beginning to rise, albeit from a low base, and this will continue to put pressure on earnings growth in the medium term. Nevertheless, these banks have been resilient through various economic cycles and have a record of consistent results. In Fitch's view all banks are adequately capitalised. Capital ratios are rising and are comfortably above phased-in Basel III requirements. Capital ratios are supported by solid earnings and measured loan growth. Access to capital is good, particularly by emerging market standards, with sophisticated capital structures and relatively deep domestic capital markets. Some banks have issued Basel III-compliant hybrid Tier 1 instruments. Banks are mostly deposit funded, but there is structural weakness in funding due to the intermediation of many retail deposits by money managers. However, banks are gradually growing more traditional (and more stable) retail deposits and have relatively diverse funding structures with high demand for local and foreign debt issuance. Contact: Primary Analyst Andrew Parkinson Director +44 20 3530 1420 Fitch Ratings Limited 30 North Colonnade London, E14 5GN Secondary Analyst Mahin Dissanayake Director +44 20 3530 1618 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: Additional information is available on 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 WEB SITE AT 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. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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