| Thu 1 Mar 2012, 12:33 | | BIFR1 - FirstRand Bank Limited - Amendment to FirstRand Bank Limited`s credit |
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JSE
FR1
BIFR1 - FirstRand Bank Limited - Amendment to FirstRand Bank Limited`s credit
ratings
FirstRand Bank Limited
(Incorporated in the Republic of South Africa)
(Registration No. 1929/001225/06)
Company code: BIFR1
("FRB" or "the Bank")
AMENDMENT TO FIRSTRAND BANK LIMITED`S CREDIT RATINGS
Noteholders are referred to the announcement issued by Moody`s Investors
Service ("Moody`s") on 28 February 2012, in which the agency announced that
it had downgraded by one notch the senior debt and deposit ratings of five
South African banks. Subsequently Moody`s has downgraded by one notch some of
the senior debt, subordinated debt, junior subordinated debt and deposit
ratings of FirstRand Bank Limited.
Moody`s stated that the rating actions were "not driven by a deterioration in
the standalone financial strength or the financial performance of these five
institutions."
The agency indicated that the "downgrades reflect the impact of the country`s
increasingly constrained public finances and Moody`s view that authorities
would face challenging policy choices if multiple institutions were to need
its financial support at the same time. The downgrades are part of Moody`s
global assessment of the systemic support levels incorporated in banks`
deposit and debt ratings, which addresses the growing difficulties
governments face in extending systemic support to their banking systems."
According to Moody`s, its "reassessment of the support environment assumes a
reduced capacity of the South African authorities to provide support to
financial institutions if needed. This reduced capacity is also signalled by
the negative outlook on South Africa`s A3 rating (please see "Moody`s changes
outlook on South Africa`s A3 government ratings to negative from stable"
dated 9 November 2011 for more information), which reflects the potential of
increased pressure on the government`s finances. The reassessment is in line
with recent global trends, where sovereigns dealing with a systemic banking
crisis possess more limited options and face constrains in providing
financial support.
"The change in systemic support assumptions has resulted in the reduction of
systemic support rating uplift to one notch from two notches before, for the
five largest South African banks. Despite the South African government`s more
constrained financial flexibility to absorb banking-related contingent
liabilities under a tail-risk scenario, Moody`s believes that systemic
support is still warranted in the banks` ratings as the authorities have
sufficient powers to intervene, despite some constraints.
"In addition, Moody`s does not foresee any meaningful political resistance
from either the government or the electorate that would compromise in any
significant way SARB`s willingness and ability to support the banking system.
Moody`s also believes that the five largest South African banks are
systemically important institutions for the country`s payment system, and
that authorities would be willing to support them if required."
SUMMARY OF RATING ACTIONS:
FRB`s GLC deposit ratings have been downgraded to A3/P-2 (stable outlook)
from A2/P-1. The long-term national-scale deposit rating of Aa2.za has been
confirmed.
With regards to the Bank`s EMTN programme, the foreign-currency senior
unsecured debt rating has been downgraded to (P)A3 (stable outlook), from
(P)A2. Any issued foreign-currency senior unsecured debt has been downgraded
to A3 (stable outlook), from A2.
The foreign-currency commercial paper has been downgraded to P-2 from P-1.
With regards to the bank`s domestic MTN programme, the provisional local-
currency senior unsecured debt rating has been downgraded to (P)A3 (stable
outlook) from (P)A2. The provisional local-currency subordinated and junior
subordinated debt ratings have also been downgraded to (P)Baa2 and (P)Baa3
(both with stable outlook), from (P)A3 and (P)Baa2 respectively. The
provisional short-term local-currency rating has been downgraded to (P)P-2
from (P)P-1. The Aa2.za national-scale rating for senior unsecured debt has
been confirmed. The national-scale rating for subordinated debt and for
junior subordinated debt have been downgraded to A1.za and A2.za, from Aa3.za
and A1.za respectively. Any issued local-currency junior subordinated debt
has been downgraded to Baa3(hyb)(stable outlook) from Baa2(hyb), and any
national-scale junior subordinated debt has been downgraded to A2.za(hyb)
from A1.za(hyb).
The C- BFSR (stable outlook), the P-1.za national-scale short-term deposit
rating, the A3 long-term foreign-currency deposit rating (negative outlook)
and the P-2 short-term foreign-currency deposit rating, all remain
unaffected.
The revised ratings are provided below:
Rating type Revised rating and previous
rating
GLC deposit rating A3/P-2 (stable outlook)from
A2/P-1
Long-term national-scale deposit Aa2.za confirmed
rating
Provisional local-currency (P)A3 (stable outlook) from
senior unsecured debt rating (P)A2
Provisional local-currency (P)Baa2 from (P)A3
subordinated debt rating
Provisional junior subordinated (P)Baa3 from (P)Baa2
debt ratings
Provisional short-term local- (P)P-2 from (P)P-1
currency rating
National-scale rating Aa2.za confirmed
for senior unsecured debt
National-scale rating for A1.za from Aa3.za
subordinated debt
National-scale rating for junior A2.za from A1.za
subordinated debt
Local-currency junior Baa3(hyb)(stable outlook)from
subordinated debt Baa2(hyb)
National-scale junior A2.za(hyb)from A1.za(hyb)
subordinated debt
Please refer to the Moody`s press release for any further information.
1 March 2012
Debt Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
Date: 01/03/2012 12:33:01 Produced by the JSE SENS Department.
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