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Announcement on S & P downgrade
FirstRand Bank Limited
(Incorporated in the Republic of South Africa)
(Registration No. 1929/001225/06)
Company code: BIFR1
(“FRB” or “the Bank”)
AMENDMENT TO CREDIT RATINGS
Noteholders are referred to the announcement issued by Standard &
Poor’s Ratings Services (“S&P”) on 16 October 2012, in which the
agency announced that it had downgraded by one notch the long-term
rating of FirstRand Bank Limited and the long and short-term
ratings of FirstRand Ltd (“FRL”).
S&P stated that the rating actions on FRB and FRL “follow the
lowering of the long-term foreign currency ratings on South Africa
(see "South Africa FC Long-Term Rating Lowered To BBB; LC Ratings
Lowered To A-/A-2; Outlook Remains Negative," published on
RatingsDirect on Oct. 12, 2012). While the stand-alone credit
profile (SACP) of FRB remains at bbb+, which is above the foreign
currency sovereign credit rating, the ratings on the Bank are
capped by the sovereign rating.”
“We do not rate South African banks above the sovereign foreign
currency ratings because of the direct and indirect effects the
sovereign in distress would have on a bank's operations,” the
agency said.
S&P is of the opinion that “strikes in South Africa's mining
sector will likely feed into the political debate in the run-up to
the 2014 elections, which may increase uncertainties related to
the African National Congress' (ANC's) future policy framework.”
The agency further stated that “underlying social tensions in
South Africa will increase spending pressures and reduced fiscal
flexibility for the government. Due to production losses, we now
expect GDP growth to soften to not more than 2.5% in 2012 and the
current account deficit to increase to at least 5.1% of GDP.”
The negative outlook reflects that on South Africa.
SUMMARY OF RATING ACTIONS:
S&P lowered the long-term rating on FirstRand Bank Ltd to BBB from
BBB+ and affirmed the A-2 short-term rating.
The long- and short-term ratings on FirstRand Ltd, the non-
operational holding company, were also lowered to BBB-/A-3 from
BBB/A-2. The outlook on the two entities is negative.
The South Africa national scale ratings on FRB and FRL were
affirmed at zaAA/zaA-1 and zaAA-/zaA-1 respectively, following the
revision of the mapping guidance for the South Africa national
rating scale following the sovereign downgrade.
Please refer to S&P’s press release for any further information.
18 October 2012
Debt Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
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