Fitch: Momentum-Metropolitan Merger Does Not Affect FirstRand Bank's Ratings
Fitch Ratings-London/Johannesburg-07 April 2010: Fitch Ratings says
today that FirstRand Bank Limited's (FRB) ratings or the ratings of
its 100%-parent, FirstRand Bank Holdings Limited (FRBH) will not be
affected by the proposed merger of the South African insurance companies,
Momentum Group Limited (Momentum) and Metropolitan Holdings Limited
(Metropolitan). The two insurers announced the proposed merger on 31
March 2010. A full breakdown of FRB's and FRBH's ratings is provided
at the end of this comment.
Under the proposed transaction, FirstRand Limited (FRL) will sell its
100%-stake in Momentum to Metropolitan in exchange for an approximate
59.5% stake in the newly merged-Metropolitan entity. FRL has indicated
that it will then unbundle its stake in the merged entity to FRL's shareholders.
Fitch notes that the transaction will not affect FRB's and FRBH's credit
quality, since the ratings assigned to these entities are based on their
standalone strength.
Following the proposed transaction, FRL's main business lines will consist
of its South African banking interests within FRB, its African banking
business and certain other non-banking activities.
FRB and its holding company, FRBH, are part of a wider integrated financial
services group FirstRand Limited (FRL), a business model that has been
in existence since the 1990s. FRL conducted its business through three
wholly owned operating groups: FRB banking group, with FRBH as the holding
company; the insurance and asset management group (with Momentum covering
life, general insurance and asset management); and a division housing
the group's unregulated activities under FirstRand Investment Holdings
(Pty) Limited. Business between the group's entities was conducted on
an arm's-length basis. Management has advised it will continue to pursue
the synergistic benefits that exist between banking, insurance and asset
management activities with the merged entity. This will be formalised
as a preferred strategic relationship on an arm's-length basis.
The transaction is contingent upon approval being received from both
companies' shareholders, and numerous regulatory bodies before 31 October
2010. Other regulatory approvals will be required from the registrar
of long-term insurance, the registrar of short-term insurance, the registrar
of banks, the registrar of pension funds, the South African Reserve
Bank, the Competition Tribunal and other African regulators.
FirstRand Bank Holdings Limited:
Long-term foreign currency IDR: 'BBB'; Outlook Negative
Short-term foreign currency IDR: 'F3'
Individual Rating: 'C'
Support Rating: '5'
Support Rating Floor: 'No Floor'
National Long-term Rating: 'AA-(zaf)'; Outlook Negative
National Short-term Rating: 'F1+(zaf)'
FirstRand Bank Limited:
Long-term foreign currency IDR: 'BBB+'; Outlook Negative
Short-term foreign currency IDR: 'F2'
Long-term local currency IDR: 'BBB+'; Outlook Negative
Individual Rating: 'C'
Support Rating: '2'
National Long-term Rating: 'AA(zaf)'; Outlook Negative
National Short-term Rating: 'F1+(zaf)'
Support Rating Floor: 'BBB-'
Applicable criteria, 'Global Financial Institutions Rating Criteria',
dated 29 December, 2009', are available on www.fitchratings.com.
Contacts: Denzil de Bie, Anthony Walker, Frederick Fouche, Johannesburg,
Tel: +27 11 380 0900.
Media Relations: Hannah Warrington, London, Tel: +44 (0) 207 417 6298,
Email: hannah.warrington@fitchratings.com.
Additional information is available at www.fitchratings.com.
Related Research:
Global Financial Institutions Rating Criteria
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