Banking Options

BANK CREDIT RATINGS

This page, which is regularly updated (last updated: 18-12-2015), contains:

  • an introductory section on the importance of selecting a stable financial institution for the investment of trust funds by practitioners.
  • credit ratings of several South African banking institutions by both Fitch Ratings Ltd and Moodys Analytics.
  • Fitch Ratings Ltd as well as Moodys Analytics rating definitions.

Selecting a stable financial institution

The importance of selecting a stable financial institution for the investment of trust funds must never be underestimated by practitioners. The current grading of South African banking institutions by Fitch Ratings Ltd and Moodys Analytics is a useful point of reference for practitioners when selecting a banking institution where trust funds might be deposited.

Please note that the Attorneys Fidelity Fund cannot be held responsible for the correctness or otherwise of the information supplied.

BANK RATINGS BY FITCH RATINGS LTD

Financial institution Short-term Long-term
ABSA Bank Ltd F3 BBB
FirstRand Bank Ltd F3 BBB-
Investec Bank F3 BBB-
Nedbank Ltd F3 BBB-
Standard Bank F3 BBB-

MOODYS -BANK RATINGS- Updated on 24-12-2015.  Ratings done on 17-12-2015.

Long term rating, Baa2. Senior unsecured, not on Watch (P) . BCA baa2, BCA Watch not on Watch. ST Issuer Level Rtg P-2.ST Issuer Level Watch, Not on Watch. Outlook Negative. Industry Non -US Banks.

Moody’s short term rating, updated on 13-01-2016.

Financial institution Short-term Long-term
ABSA Group P-2 Baa2
IFirst Rand Bank Ltd P-2 Baa2
Investec Bank P-2 Baa2
Standard Bank P-2 Baa2
Nedbank P-2 Baa2

FITCH RATING DEFINITIONS

1. Short-term ratings

F1 – Obligations assigned this rating have the highest capacity for timely repayment under Fitch Ratings Ltd national rating scale for that country, relative to other obligations in the same country. This rating is automatically assigned to all obligations issued or guaranteed by the sovereign state. Where issues possess a particularly strong credit feature, a “+” is added to the assigned rating.

F2 – Obligations supported by a strong capacity for timely repayment relative to other obligors in the same country. However, the relative degree of risk is slightly higher than for issues classified as ‘A1’ and capacity for timely repayment may be susceptible to adverse changes in business, economic or financial conditions.

F3 – Obligations supported by an adequate capacity for timely repayment relative to other obligors in the same country. Such capacity is more susceptible to adverse changes in business, economic, or financial conditions than for obligations in higher categories.

F4 – Obligations for which the capacity for timely repayment is uncertain relative to other obligors in the same country. The capacity for timely repayment is susceptible to adverse changes in business, economic, or financial conditions.

D – Obligations for which there is a high risk of default to other obligors in the same country or which are in default.

2. Long-term ratings

AAA – Obligations which have the highest rating assigned by Fitch Ratings on its national rating scale for that country. This rating is automatically assigned to all obligations issued or guaranteed by the sovereign state. Capacity for timely repayment of principal and interest is extremely strong, relative to other obligors in the same country.

AA – Obligations for which capacity for timely repayment of principal and interest is very strong relative to other obligors in the same country. The risk attached to these obligations differs only slightly from the country’s highest rated debt.

A – Obligations for which capacity for timely repayment of principal and interest is strong relative to other obligors in the same country. However, adverse changes in business, economic or financial conditions are more likely to affect the capacity for timely repayment than for obligations in higher rated categories.

BBB – Obligations for which capacity for timely repayment of principal and interest is adequate relative to other obligors in the same country. However, adverse changes in business, economic or financial conditions are more likely to affect the capacity for timely repayment than for obligations in higher rated categories.

BB – Obligations for which capacity for timely repayment of principal and interest is uncertain relative to other obligors in the same country. Within the context of the country, these obligations are speculative to some degree and capacity for timely repayment remains susceptible over time to adverse changes in business, financial or economic conditions.

B – Obligations for which capacity for timely repayment of principal and interest is uncertain relative to other obligors in the same country. Timely repayment of principal and interest is not sufficiently protected against adverse changes in business, economic or financial conditions and these obligations are more speculative than those in higher rated categories.

CCC – Obligations for which there is a current perceived possibility of default relative to other obligors in the same country. Timely repayment of principal and interest is dependent on favourable business, economic or financial conditions and these obligations are far more speculative than those in higher rated categories.

CC – Obligations which are highly speculative relative to other obligors in the same country or which have a high risk of default.

DDD – Obligations which are currently in default.

3. Support ratings

The support ratings do not assess the quality of a bank. Rather, they are Fitch ratings assessment of whether the bank would receive support should this be necessary. We emphasize that these ratings constitute Fitch Ratings opinions, although we may discuss the principles underlying them with the supervisory authorities for their comment or endorsement.

1. A bank for which there is an extremely high probability of external support. The potential provider of support is very highly rated in its own right and has a very high propensity to support the bank in question. This probability of support indicates a minimum Long-term rating floor of  ‘A’.

2. A bank for which there is a high probability of external support.
The potential provider of support is highly rated in its own right and has a high propensity to provide support to the bank in question. This probability of support indicates a minimum Long-term rating floor of ‘BBB’.

3. A bank for which there is a moderate probability of support because of uncertainties about the ability or propensity of the potential provider of support to do so. This probability of support indicates a minimum Long-term rating floor of ‘BB’

4. A bank for which there is a limited probability of support because of significant uncertainties about the ability or propensity of any possible provider of support to do so. This probability of support indicates a minimum Long-term rating floor of ‘B’

5. A bank for which external support, although possible, cannot be relied upon. This may be due to a lack of propensity to provide support or to very weak financial ability to do so. This probability of support indicates a Long-term rating floor no higher than ‘B’ and in many cases no floor at all.

MOODYS RATING DEFINITIONS

1. Debt obligations – long-term – investment grade categories

AAA – Obligations rated “AAA” have the highest rating assigned by Moodys -Ratings. The capacity of the issuer to pay interest and repay capital is extremely strong, relative to other South African obligors.

AA – Indicates very strong capacity of the issuer to pay interest and repay capital relative to other South African obligors.

A – Indicates strong capacity of the issuer to pay interest and repay capital, relative to other South African obligors, although it is slightly more susceptible to adverse changes in economic conditions and circumstances than debt in categories rated higher.

BBB – Indicates adequate capacity of the issuer to pay interest and repay capital, relative to other South African obligors. It normally has adequate protection parameters, but adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay capital than debt in categories rated higher.

2. Debt obligations – long-term ratings – speculative grade categories

BB – Indicates speculative capacity of the issuer to pay interest and repay capital in accordance with the terms of the obligation, relative to other South African obligors. Protection parameters exist, but are outweighed by uncertainties or risk from adverse changes in economic conditions. The degree of speculation is very low.

B – Indicates speculative capacity of the issuer to pay interest and repay capital in accordance with the terms of the liability, relative to other South African obligors. The degree of speculation is low. Protection parameters are likely to exist, but are outweighed by uncertainties or risk from adverse changes in economic conditions which are likely to impair capacity should they arise.

CCC – Indicates speculative capacity of the issuer to pay interest and repay capital in accordance with the terms of the liability, relative to other South African obligors. The degree of speculation is moderate. Protection parameters are likely to exist, but are outweighed by uncertainties or risk from adverse changes in economic conditions which are such that the issuer is unlikely to have the capacity to pay interest and repay capital should they arise.

CC – Indicates speculative capacity of the issuer to pay interest and repay capital in accordance with the terms of the liability, relative to other South African obligors. The degree of speculation is high.

C – Indicates that interest is being paid on an obligation, but repayment of capital is impaired.

D – Indicates default, payment of interest and/or repayment of capital being in arrears.

The ratings “AA”, “A”, “BBB”, “BB” and “B” may be modified by the addition of plus (+) or minus (-) signs to indicate relative standing within categories.

3. Debt obligations – short-term ratings (12 months or less)

A-1 – Indicates that the degree of safety regarding timely payment is either overwhelming or very strong, relative to other South African obligors. Issues determined to possess overwhelming safety characteristics are denoted with a plus (+) sign designation.

A-2 – Indicates that capacity for timely payment on issues with this designation is strong, relative to other South African obligors.

A-3 – Indicates satisfactory capacity for timely payment, relative to other South African obligors. They are, however, somewhat more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations.

B – Indicates adequate capacity for timely payment, relative to other South African obligors. However, such capacity may be damaged by changing conditions or short-term adversities.

C – This rating is assigned to short-term debt obligations with a doubtful capacity for payment, relative to other South African obligors.

D – Indicates that the issue is either in default or is expected to be in default upon maturity.