Abil’s troubles should have little effect on large South African banks: Fitch

Troubles at African Bank Investments are unlikely to have much effect on bigger South African banks, the ratings agency Fitch said on Friday, days after a rival agency downgraded the four biggest banks.

Moody’s cut ratings for Standard Bank, FirstRand, Nedbank and the local operation of Barclays Africa on concern the central bank would hesitate to protect creditors should the need arise.

The South African Reserve Bank (SARB) announced a $1.6 billion rescue package for the unsecured lender African Bank earlier this month. The bank ran into problems as its target market of low-income earners struggled to keep up with loan repayments.

“The recent failure and bail-in of African Bank Limited is isolated and any contagion to the large South African banks is likely to be limited,” Fitch said in a statement, adding it would not make any rating changes for the big lenders.

Fitch has “bbb” range viability ratings for the top five South African lenders, including Investec, but warns the country’s deteriorating economy may hurt their performance.

Rival Standard & Poor’s also said on Thursday it had no plans to downgrade the South African banks.

Fitch said the five big banks had only a small exposure to the systemically insignificant Abil, as African Bank is more widely known.

They are, however, part of a consortium underwriting 10 billion rand ($935 million) in new capital for Abil.

As part of its rescue package, the SARB acquired Abil’s 17 billion-rand bad-loan book for 7 billion rand and created a “good bank” worth 26 billion rand.

Wire Reports