US-based credit ratings agency Fitch has downgraded five South African banks to BB negative status, the agency announced on Wednesday.
The five banks – ABSA, FirstRand Bank Limited, Investec, Nedbank and Standard Bank – were downgraded due to the current coronavirus pandemic which has claimed five lives in the country so far, according to the agency.
The impact of the pandemic on the operating environment and key financial metrics would continue to have a negative effect on South Africa’s country’s economy, Fitch said.
Fitch further warned that the banks would face multiple challenges like a decline in client activity and lower interest rates as long as the pandemic continued.
The banks’ negative ratings follow that of Moody’s at the weekend, which downgraded the entire country to junk status.
This negative status makes it hard for South Africa to attract foreign investments into the country, let alone empower Pretoria to borrow funds from overseas banks or financial institutions to develop its infrastructure programme, according to local economists.
NM/jn/APA