Moody's downgrades 4 top South African banks

Moody's downgraded the credit rating of four top South African banks Tuesday after the government bailed out a troubled lender, in a move that sent ripples across Africa's most developed economy.
The ratings agency downgraded financial giants Standard Bank, FNB, Nedbank and Barclays-owned ABSA by one notch to Baa1, raising more questions about the health of the vital sector.
Moody's said the terms of African Bank's recent rescue showed that investors in other larger banks were less likely to be fully bailed out if they hit trouble.
There was now a "lower likelihood of systemic support from South African authorities to fully protect creditors in the event of need," it said in a statement.
The rand fell sharply against the dollar on the news, which came after the Johannesburg Stock Exchange had closed.  
The Reserve Bank earlier this month bought up roughly $700 million (525 million euros) of bad loans from faltering African Bank, but some investors were forced to swallow losses of 10 percent.
The lender was crippled when too many South Africans were unable to pay back loans it had made to them without demanding collateral.
The response among investors had been muted, with many seeing African Bank's failure as a one off.
While many South African banks had made similar "non-secured" loans, most notably Capitec, they also have other profitable lines of business that should help cover losses and have many more depositors.
Capitec was downgraded on Monday, prompting an angry reaction from the South African authorities and some investors.
- More downgrades possible -
The South African Reserve Bank on Tuesday rejected Moody's decision to downgrade the big four.
"While the SARB respects the independent opinion of rating agencies, we do not agree with the rationale given in taking this step, nor do we agree with the assessment it is based on," it said in a statement.
But Moody's decision raises doubts about even South Africa's biggest banks, which are deeply enmeshed in the global financial system.
The financial sector accounts for as much as a quarter of South Africa's economy and is by far the most developed on the continent, playing a key role in financing projects across Africa.
Moody's warned that further downgrades could be on the way, citing "weaker economic growth" and high inflation in South Africa, which is could pressure highly indebted consumers.
That is "likely to lead to higher credit costs for the banks," it warned.
Chris Hart of Investment Solutions said the decision showed the risks of lending without collateral, or unsecured lending.
"The downgrade is in response to the deteriorating credit quality that we are seeing in unsecured lending space, the collapse of the African Bank is indicative of that," he said.
The government has encouraged banks to lend to low-earning, mostly black, South Africans without collateral to help get people started in business or to climb on the property ladder.
But Hart said despite widespread unsecured lending, there was no risk of a systemic crisis.
"There are no fundamental problems with South African banks in terms of overall management, and overall asset and liquidity."