Moody’s announced today that, following the revision of the country’s foreign currency desposit ceiling, it had downgraded South Africa’s five biggest banks. This comes only days after the ratings agency downgraded SA’s government bond rating.

The foreign currency deposit of Standard Bank Group, Absa Group, FirstRand, Nedbank Group and Investec have been downgraded from A3 (upper medium grade) to Baa1 (medium grade).

Moody’s explained, and elaborated on, its actions in a statement released today.

Today’s rating actions were prompted by the weakening of the South African government’s credit profile‚ as captured by Moody’s downgrade of SA’s government bond rating to Baa1 (negative) from A3 on 27 September 2012; and the high sovereign exposure of the five largest South African banks.

All five aforementioned banks‚ in addition to African Bank Limited‚ carry negative outlooks on their local-currency deposit and debt ratings‚ in line with the sovereign rating outlook.

A possible deterioration in the banks’ financial performance could also trigger a rating downgrade of both their standalone and deposit ratings.

The agency is skeptical that there will be any upward rating momentum over the next year as “the banks’ standalone credit assessments are unlikely to strengthen sufficiently in the currently challenging economic environment to generate upwards ratings pressure.”

[Source: Fin24]