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Standard Bank, Adderley St, Cape Town

Standard Bank Cape Town after a horrific rating from Fitch

Lees dit en kom agter wat aan die gang is mense.  Die banke is wankelende blokkies op n bankrot bord. Kyk hoe word Fitch se gradering aangebied. Asof dit iets positiefs is. Asof dit “affirm” – want “affirm” is mos sterk ne?

(The following statement was released by the rating agency)

July 22 – Fitch Ratings has affirmed The Standard Bank of South (SBR002J.J)  Africa Limited’s (SBSA) ratings. At the same time, the agency has assigned Long-term foreign and local currency IDRs of ‘BBB+’, Short-term IDR of ‘F2’ and a Support Rating Floor of ‘NF’ (No Floor) to its parent company Standard Bank Group Limited (SBG).

Fitch has also affirmed SBG’s Short-term National, Viability and Support

Ratings. The Outlooks on the Long-term ratings of both entities are Stable. A full rating breakdown is at the end of this comment. The ratings of both entities reflect SBSA’s strong South African franchise, consistent core profitability and acceptable levels of core capitalisation. These features are balanced by weakened asset quality trends which may persist in the medium term. SBSA’s ratings also reflect the risks associated with SBG’s international emerging market activities given the integrated nature of the global banking business. SBG’s Viability Rating is equalised with SBSA’s in light of consolidated supervision by the South African Reserve Bank, low levels of double leverage at the holding company and high levels of integration across group entities. Earnings improved in 2010 due to a significant improvement in insurance profits from 54%-owned insurance subsidiary, Liberty Group Limited (Liberty) following a return to stable levels of insurance income and a positive investment performance. Although earnings from banking activities reduced by 13.8%, the improved group performance was supported by lower levels of impairment charges. Fitch expects SBG’s 2011 earnings to be better than those reported in 2010, driven by further reductions in impairment charges although revenue growth is expected to remain subdued. Given the difficult operating environment, management has taken steps to manage the group’s operating costs. Rapid asset quality deterioration has been a feature over the past three years, particularly in secured retail lending and more recently in the group’s international corporate exposures. The trend of weakening asset quality slowed considerably in 2010, and appears to havepeaked. Restructuring, write-offs and recoveries contributed to an improved NPL ratio of 7.1% at end-2010 (end-2009: 7.9%), despite the contracting loan book. Coverage remained a low 40.1% (end-2009: 38.6%). The reliance on collateral and the challenges to realising it could mean additional provisions are required in SBG’s international book.SBG has actively used loan renegotiation as a risk-management tool. Capitalisation is considered to be acceptable. High levels of Tier 1 are appropriate in view of the high proportion of group net assets employed outside South Africa and low levels of loan-loss reserve coverage. Negative rating pressure could result if capital indicators were to deteriorate from current levels. SBG is South Africa’s largest banking group.

In South Africa it owns SBSA and controls Liberty, while internationally it owns a network of emerging market-focused businesses mainly aimed at linking Africa to other large emerging markets. The group has a strategic partnership with Industrial and Commercial Bank of China (ICBC), which is a 20% shareholder in SBG.

The rating actions are as follows:

SBSA

Long-term foreign currency IDR: affirmed at ‘BBB+’; Outlook Stable

Long-term local currency IDR: affirmed at ‘BBB+’; Outlook Stable

Short-term foreign currency IDR: affirmed at ‘F2’

Viability Rating: affirmed at ‘bbb+’

Individual Rating: affirmed at ‘C’

Support Rating: affirmed at ‘2’

Support Rating Floor: affirmed at ‘BBB-‘

National Long-term rating: affirmed at ‘AA(zaf)’; Outlook Stable

National Short-term rating: affirmed at ‘F1+(zaf)’

Senior unsecured debt: affirmed at ‘BBB+’/’F2’

SBG

Long-term foreign currency IDR: assigned at ‘BBB+’; Outlook Stable

Long-term local currency IDR: assigned at ‘BBB+’; Outlook Stable

Short-term foreign currency IDR: assigned at ‘F2’

National Short-term rating: affirmed at ‘F1+(zaf)’

Viability Rating: affirmed at ‘bbb+’

Individual Rating: affirmed at ‘C’

Support Rating: affirmed at ‘5’

Support Rating Floor: assigned at ‘NF’

Long-term credit ratings

Fitch Ratings’ long-term credit ratings are assigned on an alphabetic scale from ‘AAA’ to ‘D’, first introduced in 1924 and later adopted and licensed by S&P. (Moody’s also uses a similar scale, but names the categories differently.) Like S&P, Fitch also uses intermediate +/- modifiers for each category between AA and CCC (e.g., AA+, AA, AA-, A+, A, A-, BBB+, BBB, BBB-, etc.).

Investment grade

  • AAA  : the best quality companies, reliable and stable
  • AA  : quality companies, a bit higher risk than AAA
  • A  : economic situation can affect finance
  • BBB  : medium class companies, which are satisfactory at the moment

Non-investment grade

  • BB  : more prone to changes in the economy
  • B  : financial situation varies noticeably
  • CCC  : currently vulnerable and dependent on favorable economic conditions to meet its commitments
  • CC  : highly vulnerable, very speculative bonds
  • C  : highly vulnerable, perhaps in bankruptcy or in arrears but still continuing to pay out on obligations
  • D  : has defaulted on obligations and Fitch believes that it will generally default on most or all obligations
  • NR  : not publicly rated

Short-term credit ratings

Fitch’s short-term ratings indicate the potential level of default within a 12-month period.

  • F1+  : best quality grade, indicating exceptionally strong capacity of obligor to meet its financial commitment
  • F1  : best quality grade, indicating strong capacity of obligor to meet its financial commitment
  • F2  : good quality grade with satisfactory capacity of obligor to meet its financial commitment
  • F3  : fair quality grade with adequate capacity of obligor to meet its financial commitment but near term adverse conditions could impact the obligor’s commitments
  • B  : of speculative nature and obligor has minimal capacity to meet its commitment and vulnerability to short term adverse changes in financial and economic conditions
  • C  : possibility of default is high and the financial commitment of the obligor are dependent upon sustained, favourable business and economic conditions
  • D  : the obligor is in default as it has failed on its financial commitments.

via TEXT-Fitch affirms Standard Bank of South Africa | Reuters.

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A view down the beer and wine aisle of a super...

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As a shareholder in Pick n Pay I obviously would like to see the returns on my investment grow but unfortunately, since Nick Badminton took over, there seems to have been a steady decline in performance from the company.

As a shareholder in Pick n Pay I obviously would like to see the returns on my investment grow but unfortunately, since Nick Badminton took over, there seems to have been a steady decline in performance from the company.

 Now we read that more than 3000 workers are to be retrenched and I find myself wondering why this is necessary and how it will help solve the problems (Pick n Pay to axe up to 3000 staff as market share slides, July 7). One would assume that if they are on a growth path with more stores, then more people would be hired.

As a customer, my wife finds Pick n Pay much less appealing than ever before, although she has a “card”.

– Staff, at least in Johannesburg outlets, are surly and unfriendly, which will surely not improve now.

– In the large stores the additional space is not used to provide a greater range of product but to add more and more of the same.

Every Walmart store I have visited in the US has many alternative brands. In Pick n Pay if you don’t want Ricoffy you can have Nescafe and that’s it — but it will take 10m of shelf space to show you this.

– Since it uses external merchandisers whom it doesn’t manage properly, the aisles are often blocked by merchandiser trolleys with people busy on both sides of the same aisle.

– Products are often not price-marked. Shelf marking is poor and it is necessary to check the barcode to ensure that the price you see is the price you might pay.

– There is a serious shortage of floor staff to assist customers — those that are there seem to spend their time talking to each other, always at the expense of serving the customer.

– At bakery counters the quality of fresh product varies greatly from one outlet to another and there are not enough serving staff. Plenty of people, but limited servers.

– The aisle marking is poor and confusing. Products are not, from the customer perspective at least, logically grouped to facilitate a walk-through buying pattern.

In the Norwood store the shelves are so high one cannot get a general overview of the layout or find the correct aisle marking easily.

– Floors are cluttered with “stuff”, especially as you enter the sales area, adding to the sense of confusion and chaos. His biographic details show that Mr Badminton is a Bishops boy who went straight into Pick n Pay from school at a young age.

He was apparently turfed out of home by his dad but he does not seem to have learned from that experience. I assume he has had some formal management training, although this is not shown anywhere, neither is any work experience other than at Pick n Pay. He has apparently only lived the Pick n Pay approach to selling.

When I worked in the supply chain some 20 years ago Pick N Pay was our most arrogant of customers, but it had little competition then.

Now that there is competition it needs to learn that its customers are what it is all about.

Screwing suppliers is only part of the story. Getting customers into the stores is its part of the deal. Arrogance doesn’t help. You have to listen and live the experience.

In the meanwhile, Checkers are just up my street, which is a great relief to an old man, if not to my investments.

Henry Watermeyer

Lyndhurst

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