Fitch Downgrades Investec Bank to 'BBB'; Outlook Stable
Fitch Ratings-Johannesburg/London-11 December 2009: Fitch Ratings has today downgraded Investec Bank Limited's (IBL) Long-term foreign currency Issuer Default Rating (IDR) and its parent's, Investec Limited (INL), Long-term foreign currency IDR to 'BBB' from 'BBB+' respectively. The rating Outlooks on both Long-term IDRs are Stable. At the same time, Fitch has downgraded IBL's and INL's Short-term foreign currency IDRs, and IBL's National Long- and Short-term ratings. A full rating breakdown is provided at the end of this comment.
The downgrades reflect the difficult operating environment and worsening credit conditions in South Africa, which have impacted the financial performance and asset quality indicators of INL and IBL.
The group benefits from a well established franchise in its various markets that includes private, investment banking and asset management. While profitability has been negatively impacted by the challenging operating environment, particularly from rising impairments, and is likely to remain under pressure in the short-term, revenues remain well diversified for its business model and costs well controlled. Asset quality indicators have deteriorated in the weaker operating environment and Fitch expects this to peak during 2010. Given the nature of INL's customer base of high net-worth and professional individuals, the level of defaults has remained lower compared with other major South African banks. Growth in lending, of which a high proportion is property based, has slowed from relatively strong levels in certain market segments in 2008. Risk concentrations exist on both sides of the balance sheet with a reliance on wholesale funding, although this has reduced somewhat.
Liquidity is sound and capitalisation has been improving on the back of slower growth with INL and IBL reporting Tier 1 capital ratios of 11.3% (FYE09: 10.8%) and 11.3% (FYE09: 10.5%) respectively at H110.
INL is the holding company for the Investec group's operations in South Africa. IBL is its primary banking subsidiary.
The rating actions are as follows:
Investec Limited:
Long-term foreign currency IDR: downgraded to 'BBB' from 'BBB+'; Outlook Stable
Short-term foreign currency IDR: downgraded to 'F3' from 'F2'
Individual Rating: affirmed at 'C'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'No Floor'
Investec Bank Limited:
Long-term foreign currency IDR: downgraded to 'BBB' from 'BBB+'; Outlook Stable
Short-term foreign currency IDR: downgraded to 'F3' from 'F2'
Individual Rating: affirmed at 'C'
Support Rating: affirmed at '2'
Support Rating Floor: affirmed at 'BBB-'
National Long-term Rating: downgraded to 'A+(zaf)' from 'AA-(zaf)'; Outlook Stable
National Short-term Rating: downgraded to 'F1(zaf)' from F1+(zaf).
Contacts: Anthony Walker, Denzil de Bie, Frederick Fouche, Johannesburg, Tel: +27 11 380 0900; Mark Young, London, +44 (0) 20 7417 4268.
Media Relations: Hannah Warrington, London, Tel: +44 (0) 207 417 6298, Email: hannah.warrington@fitchratings.com.
Note to editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(zaf)' for National ratings in Africa. Specific letter grades are not therefore internationally comparable.
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