FirstRand Bank rating affirmed at BB with stable outlook

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FirstRand rating stable at BB

Highlights

Fitch affirmed FirstRand Bank's Long-Term Issuer Default Rating at BB and National Long-Term Rating at AAA(zaf), both with stable outlooks.
FirstRand Bank's common equity Tier 1 ratio dropped to 12% at end-June 2026 from 13% a year earlier but stays above the 9.4% regulatory minimum.
Fitch states a downgrade of South Africa's long-term issuer ratings would trigger a downgrade of FirstRand Bank's long-term ratings and viability rating.

Rating rationale and financial profile

As reported by Fitch Ratings, the agency has affirmed FirstRand Bank Limited's Long-Term Issuer Default Ratings at BB, its Viability Rating at bb and its National Long-Term Rating at AAA(zaf), with stable outlooks on the long-term and national ratings.

Fitch says the bank's ratings are driven by its standalone creditworthiness, reflecting a large domestic franchise, strong revenue diversification, solid profitability, good capital buffers and a stable funding profile. The assessment is constrained by FirstRand Bank's concentration in South Africa and its high sovereign-related exposure relative to capital, which stood at 238% of equity at the end of the first half of 2026.

Fitch notes that FirstRand Bank is South Africa's second-largest bank, accounting for 22% of banking system assets at end-June 2026. Retail lending represented 44% of gross loans at that date, mainly in floating-rate mortgages with high loan-to-value ratios and vehicle asset finance, while the agency describes credit concentrations as moderate and market risk management as prudent.

The bank's impaired loans ratio was broadly stable at 5% at end-June 2026, compared with 5.1% a year earlier. Specific loan loss allowance coverage of impaired loans was 46%, and Fitch expects the impaired loans ratio to edge down slightly in the near term while profitability remains strong, supported by net interest margins, fee and commission income, and manageable impairment charges.

South Africa exposure and rating triggers

Fitch recently cut its 2026 real GDP growth forecast for South Africa by 20 basis points to 1.1%, citing weaker-than-expected first-half performance, particularly higher imports and lower investment. The agency says monetary easing in 2027, together with improvements in electricity, water and transport infrastructure, should help growth rise to 1.4%.

Capital remains a key rating consideration. FirstRand Bank's common equity Tier 1 ratio, excluding unappropriated profits, fell to 12% at end-June 2026 from 13% a year earlier because of growth in risk-weighted assets, a large provision linked to the UK motor finance commissions redress scheme and high dividend payments, but it remains above the 9.4% regulatory requirement.

Fitch also points to a stable funding structure dominated by customer deposits, with limited cross-border funding and low dollarisation. The bank's Fitch-adjusted gross loans-to-customer deposits ratio was 83% at end-June 2026, and liquidity coverage is described as healthy.

The agency says a downgrade of South Africa's long-term issuer ratings would lead to a downgrade of FirstRand Bank's long-term ratings and viability rating. An upgrade would require a sovereign upgrade while the bank maintains a healthy financial profile, while its national ratings are already the highest possible on South Africa's national scale.

Geopolitical shocks and elevated global interest rates are putting sovereign borrowers under renewed pressure, as persistent inflationary impulses and heavier refinancing needs erode fiscal headroom. Our earlier article noted that emerging and frontier markets are especially vulnerable because debt-service costs often absorb a larger share of government revenues, making sovereign credit profiles more sensitive to prolonged external strains.

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