For the second time in two months, US investor ratings agency Moody’s has downgraded some aspects of First Citizens, this time from corporate governance concerns arising out of the bank’s Initial Public Offering (IPO).
Yesterday, Moody’s downgraded First Citizens’ financial strength rating from C- to D+, lowering the baseline credit assessment (BCA) to baa3 from baa1.
The bank’s long- and short-term local currency deposit ratings were also downgraded to Baa1/Prime-2 from A2/Prime-1, with the outlook changed to stable from negative.
The long- and short-term foreign currency deposit ratings of Baa1/Prime-2 were affirmed with a stable outlook.
Moody’s said that the downgrade is reflective of “corporate governance concerns evidenced by the non-renewal of the mandates of the former chairwoman of the board and three other directors during the Annual Meeting of Shareholders held on May 12”.
Moody’s noted that the downgrade in stand-alone ratings considers the flaws that recent events have revealed in the rules governing the IPO as well as potential shortcomings in the bank’s governance and operational risk controls.
In a statement issued yesterday, First Citizens said Moody’s position was “as a result of the issues surrounding the former chief risk officer with regard to the First Citizens IPO”.
“The bank remains a strong institution with a capitalisation ratio of 67 per cent as evidenced by its performance in the first six months of the fiscal year despite excess liquidity and low interest rates.”