Moody's Investors Service assigned a provisional (P)Baa1 senior unsecured debt rating to Standard Bank of South Africa's $4 billion Euro Medium-Term Notes (EMTN) programme. The new rating has also been placed on review for downgrade, in line with the ongoing review for the bank's Baa1 deposit ratings and its standalone bank financial strength rating (BFSR) of C-, which is currently equivalent to a baseline credit assessment (BCA) of baa1.
The new rating for the EMTN programme is in line with the bank's Baa1 deposit ratings, Moody's said. The ratings service's review of the rating is focused on an assessment of the challenging domestic operating environment in South Africa.
The bank's ratings could be downgraded if Moody's considers that the currently challenging operating conditions will lead to a deterioration in its earnings and capital metrics, due to higher than expected loan loss provisions, and/or pressure in its funding and liquidity profile.
In addition, a deterioration in the creditworthiness of South Africa, currently rated Baa1 negative, could also exert downward pressure on the Bank's ratings, in view of its sizeable holdings of sovereign debt securities.
As indicated by the rating review for downgrade, there is limited likelihood of any upwards rating momentum over the near-term.
No subordinated debt rating has been assigned to the EMTN programme because of the absence of any contractual loss-absorption features in the terms and conditions for subordinated notes, Moody's said. Such features are required by the South African Reserve Bank in order to be both Basel III-compliant and eligible for Tier 2 capital. As a result, Standard Bank of South Africa will not be issuing any subordinated notes under its EMTN programme, until it incorporates such loss-absorption provisions in the terms and conditions of its programme.
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