Fitch Revises Stanbic Bank Kenya’s Outlook to Negative at ‘BB-‘
Fitch Ratings has revised Stanbic Bank Kenya’s (SBK) Outlook to Negative from Stable and affirmed the bank’s Long-Term Issuer Default Rating (IDR) at ‘BB-‘.
The rating action follows the downgrade of the bank’s ultimate parent, South Africa-based Standard Bank Group Limited (SBG), to ‘BB’/Negative from ‘BB+/Negative’. Fitch views that Stanbic’s IDR should be one notch below Stanbic’s, if country risks allowed. Following Stanbic’s downgrade, Kenya’s Country Ceiling of ‘BB-‘ (which captures Fitch’s view of the country’s transfer and convertibility risks), no longer serves as a constraint for Stanbic’s IDR, which is now rated one notch below SBG. The Negative Outlook on Stanbic’s IDR reflects that on SBG’s.
Despite operating outside SBG’s core market of South Africa, the rating group views Stanbic Bank Kenya as a strategically important subsidiary with a significant role in the group’s pan-African strategy. As one the largest economies in Sub-Saharan Africa and the largest economy in the East Africa Community, Kenya represents an important growth market for SBG. SBK has a long record of supporting group objectives, including through healthy earnings.
Fitch’s assessment of SBG’s propensity to provide support also considers a high level of integration between SBK and the wider group at management level and in the use of common products, risk policies and processes, systems and branding. It also considers a commitment by SBG to ensure that its subsidiaries, including Stanbic’s, meet local capital requirements.
SBG has large resources to support Stanbic’s, which accounted for only 1.8% of consolidated group assets at end-2019. Nevertheless, the probability of support from SBG is considered only moderate given Stanbic’s IDR of ‘BB’.
The Negative Outlook on Stanbic’s Long-Term IDR reflects that on the parent.
Stanbic’s National Ratings reflect Fitch’s view of the bank’s relative creditworthiness within Kenya. The Outlook on Stanbic’s National Long-Term Rating has been revised to Negative from Stable, in line with the Outlook on the bank’s Long-Term IDR.
Stanbic Bank Kenya has an ESG Relevance Score of 4 to reflect Kenyan banks’ exposure to potential shift in social or consumer preferences as a result of an institution’s social positions, or social and/or political disapproval of core banking practices.
Except for the matters discussed above, the highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity