Moody's Investors Service at the weekend downgraded to A3 from A2 the long-term local-currency deposit and foreign-currency senior unsecured debt ratings of Absa Bank Limited, the South African subsidiary of Barclays Bank plc.
The downgrade reflects the reduced capacity of Barclays to provide timely capital and funding support to Absa, in case of need, as indicated by the downgrade of Barclay's long-term deposit and debt ratings to A2 (negative outlook), from Aa3, and the lowering of its standalone bank financial strength (BFSR) to C-/baa2 (stable outlook on the C-), from C/a3, the ratings agency said.
Moody's has also downgraded to A2.za from A1.za the national-scale issuer rating (NSR) of United Towers (Proprietary) Ltd, a fully-owned subsidiary of Absa. The downgrade of United Towers is driven by the downgrade of Absa's long-term deposit rating, which is used as a benchmark for positioning United Towers' NSR.
The outlooks are stable on Absa's local-currency deposit and foreign-currency senior debt rating and United Tower's NSR. Absa's standalone BFSR of C-/baa1 was not affected. Today's rating action concludes Moody's review for downgrade on Absa, initiated on 10 November 2011 and subsequently extended on 28 February 2012.
Moody’s said the downgrade of Absa's deposit and senior unsecured debt ratings was triggered by the recent downgrade of the standalone credit assessment of Barclays, which owns 55.5% of Absa. Moody's has removed the one notch of rating uplift from parental support previously incorporated in Absa's deposit and senior debt ratings, following the conclusion of Barclay's ratings review that positioned its standalone credit assessment at baa2, one notch lower than Absa's baa1. Absa's deposit and senior debt ratings continue to benefit from one notch of rating uplift due to systemic support, given its importance in the South African market as the second-largest commercial bank.
Moody's also acknowledges that Absa, which accounts for approximately 10% of Barclays group's total revenues, will continue to benefit from the banking and operational expertise available from the parent bank.
Furthermore, Absa remains a self-sufficient and operationally independent entity without any funding dependence from Barclays, it said.
The downgrade of United Towers' national-scale issuer rating is prompted by the downgrade of Absa's deposit rating. United Towers is the preference shares funding and investment subsidiary of Absa. As Absa also guarantees the former's preference share obligations through a put option provided to investors, the issuer rating assigned to United Towers is driven by Absa's deposit rating, Moody’s said.