Johannesburg, 14 Nov 2013 — Global Credit Ratings has today affirmed the long term international scale and affirmed the short term international scale issuer ratings assigned to Investec Bank Plc of BBB+ and A2 respectively; with the outlook accorded as Stable. The rating(s) are valid until 11/2014.
Global Credit Ratings has accorded the above credit rating(s) on Investec Bank Plc based on the following key criteria:
Investec Bank plc (“IBP” or “the bank”) is part of the Investec group comprising Investec Ltd and Investec plc. The ratings are held up by IBP’s established domestic franchise value (considering that its niche focus translates into a relatively captive market/client base) and risk appropriate capital cushioning. These facts are, however, partially offset by the uncertainties around a fundamental global economic recovery. IBP is listed on the London Stock Exchange (“LSE”) and alongside its counterpart, Investec Ltd, on the Johannesburg Securities Exchange (facilitated via the group’s Dual Listed Companies Structure, implemented in 2002).
Capitalisation remains adequate, with the core Tier 1 ratio and total risk weighted capital adequacy (“RWCA”) ratio amounting to 11.1% and 16.3% respectively as at FYE13, calculated in line with Basel II capital requirements as currently applicable in the United Kingdom (“UK”). Against an overall weak macroeconomic backdrop and tough credit environment, IBP’s loan book was under pressure for most of F13, as evidenced by the underlying composition (by ageing category) and quantum of non-performing loans. This notwithstanding, gross default loans as a percentage of gross core advances decreased marginally to 6.0% (FYE12: 6.1%), partly masked by loan growth. Arrears coverage increased from 34.1% to 38.4% in F13, while the remaining exposure is covered by the fair value of collateral held (effectively neutralising any possible portfolio losses). Net default loans, amounted to 12% of capital (FYE12: 13.5%) over the same period. Pre-tax profit was up 51.9% to £56.8m in F13, reversing a decline in growth in the previous period. The improved earnings growth was largely attributable to lower impairment charges on the back of significant bad debt recoveries and growth in net interest income. Other income grew by a marginal 1.5% (F12: 15.4%), largely as a result of lower income on the fixed income portfolio in the UK operations. IBP’s liquidity risk profile is tightly controlled, with liquidity maintained well within internal and regulatory targets.
IBP’s fragile operating environment increases the error margin on all forward looking scenarios. Nevertheless, a sustained improvement in asset quality, capital and earnings would be positively considered. The ratings will be sensitive to a sudden weakening in asset quality indicators, long-term earnings (on the back of an uncertain economic environment), or a material reduction in capital from current levels. Other pressure points include the impact of new regulations on banks’ business and/or operational models over the medium term
|INTERNATIOAL SCALE RATINGS HISTORY|
|Initial rating (Oct/2000)|
|Long term: A-; Short term: A2|
|Last rating (Dec/2012)|
|Long term: BBB+; Short term: A2|
|+27 11 784 1771|
|Sector Head: Financial Institution Ratings|
|+27 11 784 1771|
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GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument.
Investec Bank Plc participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The credit rating/s has been disclosed to Investec Bank Plc with no contestation of the rating.
The information received from Investec Bank Plc and other reliable third parties to accord the credit rating included the latest available audited annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, full year detailed budgeted financial statements, most recent year to date management accounts, corporate governance and enterprise risk framework, reserving methodologies, capital management policy, Industry comparative data and regulatory framework and a breakdown of facilities available and related counterparties.
The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the ratings.