The rating agency said that CfC Stanbic’s outlook is stable despite last month’s downgrading of SBG from stable to a negative outlook.
The rating agency, however, said if CfC Stanbic were to run into trouble it would have a major effect on SBG due to the interlinked operations.
Fitch Ratings has assigned CfC Stanbic Bank a stable outlook despite downgrading its parent company Standard Bank Group Ltd (SBG), a Johannesburg-headquartered giant whose main market has been hit by labour unrest.
Standard Bank is the largest shareholder in CfC Stanbic with 60 per cent stake.
The rating agency said that CfC Stanbic’s outlook is stable despite last month’s downgrading of SBG from stable to a negative outlook, which came on shortly after it lowered South Africa sovereign rating to negative from stable.
Fitch revised South Africa’s rating following weak economic results and a series of strikes that have buffeted Africa’s second-largest economy.
Absa Bank, FirstRand Bank and Nedbank are the other major South African banks that have seen their ratings downgraded to negative from stable.
Analysts at Fitch said by SBG having a higher rating than its subsidiaries makes room for parent company’s rating to be revised downwards, without this affecting the likes of CfC Stanbic.
“The rating of the parent company can come down up to three notches before it affects the subsidiary, based on our current view of support,” said Andrew Parkinson, an analyst at Fitch.
The rating agency, however, said if CfC Stanbic were to run into trouble it would have a major effect on SBG due to the interlinked operations.
“Fitch considers CfC Stanbic as a strategically important subsidiary of SBG, given high levels of strategic and operational integration, its majority ownership, as well as Kenya’s role in SBG’s East-Africa strategy. There are high levels of integration in the day-to-day management of risk across the group and Fitch views the reputational risk on SBG of a default by CfC Stanbic as extremely high,” said Fitch.
Fitch has not rated any other Kenyan bank.
Ratings influence the cost at which the institutions can access financing especially in the international market and for lending institutions, a higher price would translate to a high cost for customers.
International rating agencies have given Kenya a stable outlook but have said that the growing insecurity is a cause for concern.
“Kenya’s deteriorating security situation has been key to driving the deceleration of growth in the quarter under review. Despite ranking the country’s risk outlook as B1 stable in May 2014, credit rating agency, Moody’s, observes that susceptibility to deteriorating security poses a major threat to growth in 2014/15,” said a monthly report by StratLink Africa.
The World Bank said that the rising insecurity will reduce economic growth prospects to 4.7 per cent from 5.2 per cent. But the Treasury says it will not downgrade economic growth forecast until quarter two result confirm a trend.
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