Fitch Downgrades South African Banks to 'BB-'/Negative on Sovereign Downgrade

The rating actions follow Fitch’s downgrade of the sovereign’s Long-Term IDRs to ‘BB-‘ from ‘BB’ on 20 November 2020 (see: Fitch Downgrades South Africa to ‘BB-‘; Outlook Negative at www.fitchratings.com). Fitch considers that the South African banks cannot be rated above the South African sovereign given the high concentration of their activities within South Africa and significant sovereign exposure (dominated by government debt but also includes that of public-sector corporates) ranging between 175% and 245% of the banks’ capital at end-June 2020.

The Negative Outlooks on the banks’/groups’ Long-Term IDRs are aligned with the Negative Outlook on the sovereign rating.

Fitch has also downgraded the five banks’ Support Ratings (SR) to ‘4’ from ‘3’ and revised their Support Rating Floors (SRF) down to ‘B+’ from ‘BB-‘. This reflects the sovereign’s reduced ability to provide support, in case of need, due to a weakening fiscal position.

The National Ratings, including those assigned to senior unsecured and Tier 2 debt issues, are unaffected by this rating action.