Fitch Downgrades South Africa's Imperial Bank to 'A+(zaf)'
Fitch Ratings-London/Johannesburg-27 July 2009: Fitch Ratings has today downgraded South Africa-based Imperial Bank Limited's (Imperial) National Long-term rating to 'A+(zaf)' from 'AA-(zaf)' and downgraded the National Short-term rating to 'F1(zaf)' from 'F1+(zaf)'. The Outlook on the National Long-term rating is Stable. The agency has simultaneously affirmed the Support Rating at '2'. The ratings assigned to the bank's subordinated debt are also downgraded to 'A(zaf)' from 'A+(zaf)'
The downgrade reflects Fitch's rating action on Friday on Imperial's parent, Nedbank Limited (Nedbank, rated 'AA-(zaf)'/Outlook Stable) which has a 50.1% stake in Imperial. Nedbank's Long-term IDR was downgraded to 'BBB' from 'BBB+' and the National Long-term rating was downgraded to 'AA-(zaf)' from 'AA(zaf)'. Imperial's ratings reflect the strong perceived level of support that the bank enjoys from Nedbank. Any further changes to Imperial's ratings would be driven by a change in Nedbank's National ratings and/or if there is a change in the perceived level of support for Imperial.
Imperial's net earnings declined 24.6% to ZAR361.2m during FY08 following significantly higher impairment charges on the back of a sharp deterioration in asset quality. During FY08, impairment charges represented a high 56.3% of pre-impairment operating profit (FY07: 37.6%). Fitch expects that Imperial's FY09 earnings may be lower than that achieved during FY08 on the back of increasing NPLs which may lead to higher impairment charges negatively affecting financial performance. Imperial's gross loans grew at a relatively robust 25.5% to ZAR45.7bn at FYE08, especially in motor vehicle finance. Excluding the impact of write-offs, the bank's non-performing loans tripled. Despite this weakening, Imperial's NPL ratio improved to 2.5% at FYE08 (FYE07: 3.2%) following extensive write-offs. Coverage remained acceptable at 84.5% at FYE08 (FYE07: 92.9%). At FYE08, Imperial reported a Tier 1 capital adequacy ratio of 8.5% (FYE07: 6.8%).
Imperial is a niche provider of asset-based finance and was initially established in 1996 as a wholly-owned bank subsidiary of Imperial Holdings Limited (IHL). In January 2001, Nedbank acquired a 50.1% controlling stake in the bank, as part of a strategic joint venture agreement with IHL. Nedbank provides Imperial Bank with funding and risk management support. IHL provides the bank with access to its extensive network of business operations throughout South Africa.
Contacts: Denzil de Bie, Anthony Walker, Johannesburg, Tel: +27 11 380 0900.
Media Relations: Hannah Warrington, London, Tel: +44 (0) 207 417 6298, Email: hannah.warrington@fitchratings.com.
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 South Africa. Specific letter grades are not therefore internationally comparable.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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