Johannesburg, 10 June 2013 — Global Credit Ratings has today affirmed the long term national scale and affirmed the short term national scale issuer ratings assigned to Standard Bank of South Africa Limited of AA+(ZA) and A1(ZA) respectively; with the outlook accorded as Stable. Furthermore, Global Credit Ratings has assigned an initial international scale rating of BBB+ to Standard Bank of South Africa Limited; with the outlook accorded as Stable.
Global Credit Ratings has accorded the above credit rating(s) on Standard Bank of South Africa Limited based on the following key criteria:
The accorded ratings reflect the group’s established international franchise value, improving asset quality and performance, and risk appropriate capital cushioning. These are though, partially offset by the slow economic growth prospects in most of the group’s main Africa jurisdictions, as well as the contagion of further weaknesses or shrinkage in the advanced economies (given its bearing on trade earnings and, so also, state coffers).
Much has been done of late to recalibrate and align the group’s resource structure/allocations with international best practice (aimed at optimising both ‘type’ and ‘tenor’ characteristics) – however, some teething issues and earnings dilution are still expected during the individual transition and implementation phases. Overall, the group’s capital position ended the period stronger, satisfying all regulatory and internal floor minima’s – though lagging its peers by absorbing by far the most capital.
Though the bank continued to rapidly amass arrear accounts in the first half of the year, it stuck to its strategy, merely shifting and tweaking such to stem the flow of impaired loans – worth noting though, is that the bank’s default level was inflated by absorbing assets originated outside the country, along with a recalibration of the risk within its mortgage lending portfolios. All-in-all, portfolio health displayed a structural improvement over the period, despite the need to bump up provision cover.
Despite the adversarial operating climate, the group managed a positive performance; on a segmented basis, the bank’s profit centres grew headline earnings by at least a ⅕ year-on-year – personal and business banking benefitted from higher loan growth, risk based pricing and transactional volumes, whilst corporate and investment banking reported an uptick in fee and commission income and investment banking loan growth. Overall, average shareholder and efficiency returns improved.
Positive rating movement/s: The bank’s fragile operating environment increases the error margin on all forward looking scenarios. This, combined with sovereign linked risk, makes an upgrade unlikely.
Negative rating movement/s: The ratings will be sensitive to a slide in asset quality, long-term earnings and/or a decline in capital levels.
NATIONAL SCALE RATINGS HISTORY
Initial rating (Jun/2001)
Long term: AA(ZA);
Last rating (Aug/2012)
Long term: AA+(ZA); Short term: A1+(ZA)
Sector Head: Banks
Johannesburg, South Africa
+27 11 784 1771
Johannesburg, South Africa
+27 11 784 1771
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
GCR’s Criteria For Rating Banks, 2013
The ratings above are unsolicited and accorded based on publicly available information
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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; and d.) the validity of the rating is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.
Standard Bank of South Africa Limited did not participate in the rating process, though GCR is satisfied that the public information available was sufficient.
The credit rating/s has been disclosed to Standard Bank of South Africa Limited with no contestation of the rating.
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