OREANDA-NEWS. Fitch Ratings has affirmed Kenya-based CfC Stanbic Bank Limited's (CfC Stanbic) Long-term Issuer Default Rating (IDR) at 'BB-' and National Long-term Rating at 'AAA(ken)'; both with Stable Outlooks. The Viability Rating (VR) has also been affirmed at 'b'. A full list of rating actions is available at the end of this rating action commentary.

KEY RATING DRIVERS

IDRS, SUPPORT RATING AND NATIONAL RATINGS
CfC Stanbic's IDRs, Support Rating and National Ratings are driven by a moderate probability of support from the bank's ultimate parent, South African based Standard Bank Group (SBG; BBB/Negative), which owns 60% of the bank.

Although outside of the parent's core market of South Africa, we view CfC Stanbic as a strategically important subsidiary of SBG. In its annual report, SBG identifies a number of subsidiaries (including CfC Stanbic), in which it commits to ensure that the subsidiary is able to meet all contractual liabilities, except in the case of political risk. SBG's 'rest of Africa' region remains an integral part of group strategy and there is substantial operational integration between SBG and CfC Stanbic, in terms of personnel, risk management frameworks and reporting lines.

Despite the high propensity to support from the parent, CfC Stanbic's IDRs and Support Rating are constrained by Kenya's Country Ceiling of 'BB-' due to transfer and convertibility risks beyond this level. CfC Stanbic's National Ratings reflect Fitch's view of the bank's relative creditworthiness within Kenya.

VIABILITY RATING
CfC Stanbic's VR considers the challenging operating environment in Kenya. This includes a higher interest rate cycle, pressure on the currency, rising inflation and the economy's sensitivity to agriculture production and security threats. Spending on infrastructure has been slow in Kenya but is seeing some recent traction, which we expect to improve further in the medium-term due to the devolution of power to counties/local governments.

The VR also considers CfC Stanbic's sound risk framework compared with peers and a good corporate and investment banking franchise, both of which benefit from the bank's close links with SBG. The VR further reflects the bank's rapid loan growth, which may negatively affect asset quality when loans season, and a less stable earnings base due to a high contribution from trading activities.

RATING SENSITIVITIES

IDRS, SUPPORT RATING AND NATIONAL RATINGS
Given that CfC Stanbic's IDRs and Support Rating are constrained by the Kenyan Country Ceiling and the bank's strategic importance to SBG, we believe that CfC Stanbic's current IDRs and Support Rating are able to tolerate a downgrade of SBG's Long-term IDR of up to three notches. Unless our view of the importance of CfC Stanbic to SBG changes, Fitch will maintain at least a one-notch difference between the Long-term IDR of SBG and CfC Stanbic.

CfC Stanbic's IDRs and Support Rating are also sensitive to a change in Kenya's Country Ceiling, most likely triggered by a rating action on the sovereign ratings. The sovereign rating currently has a Stable Outlook.

The IDRs, Support Rating and National Ratings are also sensitive to a lower perceived willingness of SBG to provide support to CfC Stanbic.

VIABILITY RATING
CfC Stanbic's VRs is sensitive to an erosion of the bank's capital base. This would mostly likely be driven by deteriorating asset quality resulting from rapid loan growth.

We view an upgrade of the VR as unlikely at present given the challenges in the operating environment. However, larger capital and liquidity buffers and a more stable earnings base would be credit-positive.

The rating actions are as follows:
CfC Stanbic Bank
Long-term IDR affirmed at 'BB-'; Outlook Stable
Short-term IDR affirmed at 'B'
Viability Rating affirmed at 'b'
Support Rating Affirmed at '3'
National Long-Term Rating affirmed at 'AAA(ken)'
National Short-Term Rating affirmed at 'F1+(ken)'