SA banks prepare for the worst ahead of possible ratings downgrades
Most banks have been factoring in downgrades for some time, with changes in evaluations likely to see SA removed from some indices tracked by global investors
South African banks are preparing for the worst when it comes to the threat of another downgrade of the country’s debt. "FirstRand has anticipated the downgrades since 2015 and has been working on a number of proactive strategies to mitigate the impact," said Andries du Toit, the treasurer at FirstRand. The measures include tightening lending and boosting liquidity and capital buffers, he said. The credit ratings of Africa’s largest lenders, such as Standard Bank, Barclays Africa, Nedbank and FirstRand are inextricably tied to that of SA, where they make most of their profit. Banks also need to hold sovereign bonds for regulatory purposes, meaning that any increase in the government’s borrowing costs immediately causes the capital the companies need to support lending to become more expensive. Last month, in a move that may help establish a sizable offshore base, FirstRand offered to buy all of the UK’s Aldermore Group for about £1.1bn ($1.4bn). Although the purchase of the challeng...
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