Fitch upgrades FNB, Standard Bank, Nedbank, Absa and Investec, says there's scope to go higher

Ratings agency Fitch has upgraded the national long-term ratings of five South African banks, saying their creditworthiness has improved relative to other credit in the country, including that of the government and state-owned entities. FNB, Standard Bank, Nedbank, Absa and Investec have also achieved a stable outlook.

Despite the sovereign risks, "Fitch believes the banks have significant headroom to withstand current pressures on the operating environment," the ratings agency said in a note on Tuesday. 

"The South African banks' company profiles, management and strategy, and risk appetite remain key strengths." 

The stable outlook reflected its belief that "the banks' relative creditworthiness to other domestic issuers' is unlikely to change over a one- to two-year period" and that South Africa's "national rating scale relativities are unlikely to change in the event of a sovereign downgrade".

It said the ratings could be upgraded further "if the banks continue to perform satisfactorily while other leading domestic issuers experience increased stress". 

Factors that could lead to the negative ratings actions include downside risks resulting "from a weakening in the banks' standalone credit profiles, especially any material deterioration in asset quality, profitability and capital if this is not accompanied by a simultaneous weakening in the operating environment and the credit profiles of other domestic issuers."