FITCH Ratings has downgraded the viability ratings of South Africa’s major banks by one notch, following the recent downgrade of the South African sovereign rating.

The banks affected are Absa, FirstRand, Investec, Nedbank and Standard Bank, and their respective rated holding companies.

FirstRand, Nedbank and Standard Bank had their viability ratings and, as a result, their long-term issuer default ratings downgraded to BBB from BBB+, while Investec’s issuer default rating and viability rating were both downgraded to BBB- from BBB.

Fitch said the downgrade of the banks’ viability ratings reflected their concentration in South Africa, a high proportion of liquid assets invested in government securities, and a weakening operating environment, as indicated by the downgrade of the sovereign rating.

"The sovereign rating is now effectively acting as a cap on these banks’ viability ratings at this rating level because of their strong links with South Africa," Fitch said.

In cutting South Africa’s sovereign rating to BBB, the agency said social and political tension had increased. Subdued growth coupled with rising corruption had constrained the ability to raise living standards, reduce the unemployment rate and redress historical inequalities.

Fitch said the sovereign downgrade had also resulted in a recalibration of the national rating scale for the country, which had affected several other institutions in the country.

The Development Bank of Southern Africa and the Land Bank would be sensitive to changes in the government’s willingness or ability to support them.

On Wednesday, Fitch revised the national ratings of 14 South African state-owned and private-sector issuers, including Eskom, Transnet, Rand Water, Umgeni Water and Denel.

It said for entities that were not state-owned, the downgrades reflected only "the recalibration of the South Africa national scale and no change in Fitch’s assessment of fundamental issuer specific credit considerations".

These included MTN, Bidvest, Barloworld, Mercedes-Benz South Africa, Aveng, Sappi Southern Africa, Pick n Pay and Naspers.

With Samuel Mungadze