Staff Writer
Moody’s Ratings has upgraded the outlook on South Africa’s five largest banks from stable to positive, citing improvements in the country’s economic environment, stronger fiscal performance and a resilient banking sector.
The ratings agency affirmed the Baa3 long-term deposit ratings of The Standard Bank of South Africa, FirstRand Bank, Absa Bank, Nedbank and Investec Bank.
It also affirmed the Ba2 issuer ratings of Absa Group, Nedbank Group and Standard Bank Group.
The Standard Bank Group is the majority shareholder of SBN Holdings Limited, the holding company of Standard Bank Namibia. Nedbank Group holds a controlling stake in Nedbank Namibia, while FirstRand Limited owns FirstRand Namibia Limited, the holding company of FNB Namibia.
The outlook revision follows Moody’s decision last week to maintain South Africa’s sovereign credit rating at Ba2 while upgrading the country’s outlook to positive from stable.
According to Moody’s, the improved outlook reflects better operating conditions, gradual progress in South Africa’s fiscal position and continued structural reforms.
The agency said prospects for meaningful reform outcomes are improving despite risks linked to geopolitical tensions and conflict in the Middle East.
“The banking sector benefits from the improved sovereign outlook given the close links between banks and the government,” Moody’s said.
The agency noted that South African banks hold large amounts of government securities and have significant exposure to the public sector.
Moody’s estimates that public sector exposure accounted for about 17% of banking sector assets at the end of 2025.
The ratings agency also highlighted improvements in banking sector performance.
By March 2026, the sector’s return on assets stood at 1.2%. The Common Equity Tier 1 capital ratio reached 13.7%, while the liquidity coverage ratio stood at 156%.
Impaired loans declined to 4.7% of gross loans.
Despite these improvements, Moody’s said challenges remain.
High inflation, elevated interest rates and persistent unemployment continue to place pressure on households and could affect loan performance.
The agency also pointed to the banking sector’s reliance on institutional deposits, which are generally more sensitive to changes in market confidence.
For most South African banks, Moody’s said their standalone credit strength remains constrained by the country’s sovereign rating because of their concentration in the domestic market and large holdings of government bonds.
Standard Bank’s strengths include its market position, liquidity and earnings capacity.
Investec was recognised for its asset quality, capital position and liquidity levels.
FirstRand’s ratings were supported by strong profitability and stable funding. However, Moody’s noted that the group remains exposed to risks linked to the United Kingdom motor finance commission investigation.
The bank has already announced plans to dispose of its UK operations through the sale of the Aldermore Group.
Nedbank and Absa were recognised for their market positions, investment in digital platforms, liquidity and capital buffers, although both remain exposed to broader economic risks and developments linked to South Africa’s sovereign position.
