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Fitch Downgrades Barclays Africa Group & Absa Bank to 'BBB-'.

London: Fitch Ratings has downgraded Barclays Africa Group Limited (BAGL) and Absa Bank Limited's (Absa) foreign currency Long-term Issuer Default Ratings (IDR) to 'BBB-' from 'BBB' and the local currency Long-term IDRs to 'BBB-' from 'BBB+'. A full list of rating actions is at the end of this rating action commentary.

The downgrades follow the announcement by BAGL's parent, Barclays PLC's (Barclays; A/Stable) of the sale of its African operations. Barclays holds a 62.3% stake in BAGL.

The downgrades reflect Fitch's view that there is a lower support propensity from Barclays for BAGL and Absa given the parent's intention to sell its controlling stake in BAGL (which fully owns South African domestic bank, Absa) and deconsolidate the subsidiary (from both an accounting and regulatory perspective) over two to three years.

Fitch does not exclude the possibility of Barclays providing support to BAGL and/or Absa in case of need while it maintains a meaningful ownership share and management control. However, we consider BAGL and Absa to be of limited strategic importance to Barclays and are unable to fully rely on any potential institutional support from the parent for the subsidiaries' ratings.

Consequently, we have downgraded BAGL and Absa to 'BBB-', which reflects their respective financial strength and standalone creditworthiness, as defined by their Viability Ratings (VRs) of 'bbb-'.

KEY RATING DRIVERS

SUPPORT RATING AND SUPPORT RATING FLOOR

The downgrade of BAGL's Support Rating (SR) to '4' reflects Fitch's belief there is a limited probability of support from Barclays in the transition phase, up to the point of sale.

The agency has also downgraded Absa's SR to '3', as we consider a moderate probability of support from the South African authorities is more likely than from Barclays, due to its status as a domestic systemically important bank.

Fitch has also assigned Absa a Support Rating Floor (SRF) of 'BB-' given the agency's view of the ability and propensity of the authorities to support the bank if required. The ability of South Africa to support is indicated by the sovereign rating of 'BBB-'/Stable. Absa's SR and SRF are now in line with the larger systemically important banks in South Africa.

IDRs, VRs, NATIONAL RATINGS AND DEBT RATINGS

BAGL and Absa's IDRs are now driven by their respective VRs, which are unaffected. The South African sovereign rating effectively acts as a cap on BAGL and Absa's VRs at this level because of their strong links with South Africa. The VRs also reflect solid company profiles, high quality management, sophisticated risk management and strong financial metrics. The strategic and operational links with the parent are also considered in the VR, but these are expected to weaken over time.BAGL and Absa's National Long-term Ratings of 'AA(zaf)' are driven by their Long-term local currency IDRs. National Ratings reflect the creditworthiness of an issuer relative to the best credits in the country. The downgrade of the National Ratings also considers the removal of institutional support from the ratings.

The international and National ratings of senior and subordinated debt issued by BAGL and Absa have been downgraded, mirroring the downgrades of the IDRs and National Ratings, respectively.

RATING SENSITIVITIES

SUPPORT RATINGS, SUPPORT RATING FLOORS,

BAGL's SR is sensitive to Barclays selling its stake in the group either fully or in parts.

ABSA's SR and SRF are sensitive to change in the ability or propensity of the South African authorities to support the bank. A weaker propensity to support could be indicated by a stricter application of resolution legislation by the authorities than Fitch's current expectations.

IDRs, VRs, NATIONAL RATINGS AND DEBT RATINGS

The IDRs, VRs, National Ratings and debt ratings of BAGL and Absa could be upgraded if the operating environment improves, as reflected by an upgrade of the sovereign rating. The VRs, IDRs, National Ratings and debt ratings are sensitive to weaker financial metrics, particularly signs of higher risk appetite and a deterioration of asset quality and/or capital.

The VRs and IDRs of BAGL and Absa would be downgraded if the South African sovereign rating is downgraded.

The rating actions are as follows:

Absa Bank Limited

Long-term foreign currency IDR downgraded to 'BBB-' from 'BBB'; Outlook Stable

Long-term local currency IDR downgraded to 'BBB-' from 'BBB+'; Outlook Stable

Short-term foreign currency IDR affirmed at 'F3'

Viability Rating unaffected at 'bbb-'

Support Rating downgraded to '3' from '2'

Support Rating Floor assigned at 'BB-'

National Long-term Rating downgraded to 'AA(zaf)' from 'AAA(zaf)'; Outlook Stable

National Short-term Rating affirmed at 'F1+(zaf)'

Senior unsecured debt: downgraded to 'BBB-' from 'BBB', 'AA(zaf)' from 'AAA(zaf)' and affirmed at 'F3'

Barclays Africa Group Limited

Long-term foreign currency IDR downgraded to 'BBB-' from 'BBB'; Outlook Stable

Long-term local currency IDR downgraded to 'BBB-' from 'BBB+'; Outlook Stable

Short-term foreign currency IDR affirmed at 'F3'

Viability Rating unaffected at 'bbb-'

Support Rating downgraded to '4' from '2'

National Long-term Rating downgraded to 'AA(zaf)' from 'AAA(zaf)'; Outlook Stable

National Short-term Rating affirmed at 'F1+(zaf)';

Senior unsecured debt: downgraded to 'AA (zaf)' from 'AAA(zaf)' and affirmed at 'F1+(zaf)'

Subordinated notes: downgraded to 'AA-(zaf)' from 'AA+(zaf)'
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Publication:Daily the Pak Banker (Lahore, Pakistan)
Date:Mar 10, 2016
Words:856
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