Moody’s downgrades the rating of four large South African banks

Aug 22, 2014

Rating agency Moody’s has downgraded the rating of four key South African banks: Absa, FirstRand Bank Ltd (First National Bank) and Nedbank. It has gone from “A3” to “Baa1”.

Rating agency Moody’s has downgraded the rating of four key South African banks: Absa, FirstRand Bank Ltd (First National Bank) and Nedbank. It has gone from “A3” to “Baa1”.

This rating reflects the reality of South African banks. Indeed, Moody’s had already downgraded the African Bank rating. Placed into administration by the central bank, African Bank is to undergo a 10 billion rand (700 million euros) recapitalisation. Its creditors will lose about 10% of their investments.


Summarising the situation, a Moody’s report explains: “The one notch downgrade of the local-currency deposit and senior unsecured debt ratings reflects Moody’s view of the lower likelihood of systemic support from South African authorities to fully protect creditors in the event of need”.

Moody’s noted “the strong resilience South African banks demonstrated in the past, including when managing difficult economic landscapes”, adding that the “fundamental financial system was strong”.

Indeed, the financial sector’s development in South Africa is higher than in any other African country. Furthermore, the profitability of some banking branches can help banks overcome potential losses.ADNFCR-2976-ID-801743932-ADNFCR