Johannesburg - African Bank, the largest provider of unsecured loans in South Africa, had its foreign rating cut to junk status by Moody’s Investors Service after writing down a record amount of bad loans.

The lender’s creditworthiness was downgraded a step to Ba1, one level below investment grade yesterday, Moody’s said in a statement.

African Bank has $1.35 billion in foreign-currency bonds outstanding, according to data compiled by Bloomberg.

The downgrade “reflects the greater-than-initially anticipated deterioration in the bank’s asset quality, which resulted in a net loss,” Moody’s said.

African Bank lost 25 percent of its market value this year as bad loans more than doubled to 2.5 billion rand in the fiscal first half to March, prompting it to cancel its dividend.

The lender sold shares to investors in December to bolster its capital as South African unemployment of 25 percent and a shrinking economy left consumers struggling to pay debt.

African Bank’s local rating was cut one level to A3, which is still investment grade, the lender said in an e-mailed statement today.

The bank “continues to be adequately capitalised and liquid,” it said. - Bloomberg News