WINDHOEK – Three of the Namibians banks affiliated to their South African counterparts recently downgraded by the Moody’s Ratings Agency are adamant that the lower credit ranking will have no effect on their day-to-day operations and will not translate into increased borrowing costs for Namibian consumers.
“We do not anticipate any adverse movement on the borrowing cost of business in Namibia as a result of the Moody’s downgrading. There has been no effect on our business or the way we do business in Namibia”, said Daniel Motinga, Head of Research at FNB Namibia.
Standard Bank Namibia’s Surihe Gaomas-Guchu said the cost of US dollar-denominated financing raised in offshore markets is expected to increase minimally. “The rating action in South Africa does not impact the Namibian subsidiary. This rating action has no impact on the day-to-day running of the bank. Our focus remains unchanged and we will continue providing for our customers’ needs,” she said.
Meanwhile, Nedbank South Africa’s Group Chief Executive, Mike Brown, said the ratings action references Moody’s assessment of the industry as a whole and is not specific to Nedbank. “These actions are in line with international rating agency actions taken on a number of banks in recent years as Basel III resolution regimes have been implemented, as central banks no longer bail-out all creditors at the expense of the tax payer, and instead bail-in sub-debt holders, bond holders and potentially other creditors,” said Brown.
Brown also noted that Moody’s rating action comes after its concerns about weaker economic growth in South Africa, particularly in the context of consumer affordability pressure and high consumer levels of debt. According to the World Economic Forum, the South African banking system is rated number 3 in the world in the category of ‘Soundness of banks’. “That means that we have one of the most sound banking systems in the world”, said Brown.
In a recent interview, Andy Hsieh, Professor at University of Western Cape’s School of Business and Finance, said he was concerned that the downgrade of four of South Africa’s biggest banks, three of which operate in Namibia, will likely see consumers paying more for loans. “In my opinion the impact of the downgrade, most importantly will raise the borrowing costs for consumers, and at the same time it will also raise the financing costs for the companies operating in these markets,” said Hsieh. He said Moody’s downgraded the top banks because the South African Reserve Bank imposed a portion of the loss on the creditors of African Bank. “So in terms of the future recovery rate, of similar defaults actually happening, there are negative implications on the ability of the creditors to recover their losses. The second reason is more fundamental and it is more important, which is our sluggish economic growth in South Africa, with the prolonged strikes and labour unrest in the industry”, said Hsieh.
Moody downgraded Standard Bank, FirstRand, Nedbank and Absa Bank following news of the South African Reserve Bank bailing out troubled lender, African Bank Limited, which needed to raise about R8.5 billion following losses mostly attributed to bad loans.