Moody’s gives 7 SA banks thumbs up

Following an analysis, Moody’s Ratings has upgraded the deposit ratings of seven of South Africa’s banks, which reflects resilience in their capital, funding and profitability profiles.

The seven banks that were under review are Standard Bank, Absa, FirstRand, Nedbank, Investec, African Bank and Bidvest.

Moody’s applied the Advanced Loss Given Failure analysis, which assesses the potential impact of a bank’s failure on its various debt classes and deposits, it said.

According to Moody’s: Standard Bank

The bank has robust risk management, solid capitalisation, high liquidity and sound profitability.

Standard Bank also has a strong domestic franchise as the largest bank in the country.

However, it has a high exposure to sovereign debt securities and confidence-sensitive institutional deposits. Elevated inflation and higher interest rates pose a risk to its asset quality.

Absa Bank

The bank has had a stable deposit base, moderate profitability, and adequate capitalisation, but it still faces a challenging operating environment due to high interest rates, load shedding, and infrastructure constraints that will put pressure on asset quality.

FirstRand

The bank has strong profitability (higher than local peers), and this is underpinned by a portfolio of multi-branded businesses combined with a strong transactional franchise. The bank, however, has a high exposure to sovereign debt securities and exposure to institutional funding.

Nedbank

It has a solid local franchise, and is undertaking investments in digitisation that support its product optimisation and client service initiatives.

It also has sound liquidity buffers and adequate capitalisation profitability metrics supported by widening net interest margins.

Investec Bank

The bank’s focus on high-networth individuals has translated into sound asset quality metrics and high liquidity buffers. The bank’s funding base relies on more confidence-sensitive wholesale deposits, while its high exposure to government bonds links its credit profile to government’s.

African Bank

Its rating reflects good capital buffers and an improved funding and liquidity profile as it is broadening its deposit and funding base. But high interest rates impact consumers disposable income and debt affordability.

Bidvest Bank

Its rating reflects strong capitalisation and high liquidity, as well as its niche franchises in the foreign-exchange and vehicle-leasing segments.

These strengths are moderated by relatively weak asset quality, with high problem loans resulting from high credit concentrations.