Johannesburg - Ratings agency Fitch downgraded five South African banks on Tuesday in a widely expected move, days after it cut the country's credit rating to sub-investment grade.
The moves follow S&P Global Ratings, which also cut South African foreign debt to "junk" status and then downgraded major banks in the wake of a cabinet reshuffle that saw President Jacob Zuma sack widely respected former Finance Minister Pravin Gordhan.
Fitch said in a statement Absa Bank Limited, FirstRand Bank Limited, Investec Bank Limited, Nedbank Limited and Standard Bank had been downgraded to 'BB+' from 'BBB-'.
"The deterioration in sovereign creditworthiness brings increased risks to the banking sector. Higher borrowing costs for the sovereign will translate into further pressure on economic growth," Fitch said.
The ratings agency said this "is likely to result in deterioration of banks' financial metrics, in particular, asset quality, funding and liquidity, which is likely to have a knock-on effect on profitability and capital".
Johannesburg's Banks Index has lost around 10 percent since March 27, when Zuma unexpectedly recalled Gordhan from an international investor roadshow ahead of his sacking, sparking calls for the president to resign or be removed from the opposition, civil society groups, and key allies of the ruling ANC.