Fitch revises outlooks of S. African banks to negative

Fitch Ratings on Tuesday affirmed all South African major banks at "BBB-", but revised their outlooks to negative from stable.

The Long-Term Issuer Default Ratings (IDRs) of Absa Bank Limited (Absa), FirstRand Bank Limited (FRB), Investec Bank Limited (Investec), Nedbank Limited (Nedbank), and Standard Bank of South Africa (SBSA) were affirmed at "BBB-".

The outlook change followed the revision on the outlook of the South African sovereign rating from stable to negative on November 25, 2016, Fitch said.

Fitch has also affirmed the Long-Term IDRs of the bank holding companies, Barclays Africa Group Limited (BAGL), Standard Bank Group Limited (SBG), Nedbank Group Limited (NedGroup) and Investec Limited (IL), at "BBB-" respectively and revised their outlooks to negative from stable.

The IDRs of the banks (and their holding companies) are driven by standalone creditworthiness, as defined by the respective institutions' Viability Ratings (VR), Fitch said in a statement.

The banks' VRs are capped by the South African sovereign rating (BBB-/Negative) due to the majority of their operations being in South Africa and their high exposure to domestic sovereign debt relative to capital, according to Fitch.

This explains the revision of the Outlooks on the banks' Long-Term IDRs to Negative, mirroring that of the sovereign rating, the agency said.

"Furthermore, we view all banks' business models as diverse, with the benefit of strong management, and robust governance and risk management frameworks," Fitch said.

These factors underpin sound financial metrics, in particular capitalization and still healthy earnings generation, which can offset expected rises in loan impairments, said Fitch.

"Although we expect absolute earnings to continue to rise, we believe that growth will be slower and profitability metrics to decline over the next 12 to 18 months," the agency said. Endit