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I AM not at all surprised that Finance Minister Pravin Gordhan is infuriated with the ratings agencies. This time around he’s cross because they are pointing at what they consider to be an essential weakness in the banks’ impairment coverage for nonperforming residential mortgages.
In particular, Fitch Ratings directs its distinction at Absa which, it says, has an uncovered portion of 36% of residential mortgage loans to its equity. Nedbank is at 24%, FirstRand at 22% and Standard at 21%. Investec is easily the win out over off with 4% — but then financing residential homes isn’t exactly a hallmark of Investec’s portfolio.
But is Fitch being fair about this? If you look at capital adequacy ratios, South African banks outstrip their European and American peers by country miles, with the exception of Citigroup. Absa’s core tier 1 capital adequacy is now at 13%. Its parent, Barclays, is down at 11%. FirstRand’s tier 1 capital adequacy is 12,4%; Deutsche Bank’s is a modest 10,1%; Standard sits at 11,5%; Citigroup is easily the wealthiest at 13,6%; Bank of America comes in at a very low 8,6%; and Nedbank’s is 11%.
