Big banks at risk of ratings downgrade

New Zealand's biggest banks are at risk of having their credit ratings cut, after Kiwibank and the big four Australian-owned banks were all placed on negative ratings outlook.

Wednesday, 1 February 2012

by Niko Kloeten

Kiwibank had its outlook lowered by Standard & Poor's, only a day after rival ratings agency Fitch made a similar move in placing the big four Australian-owned banks on credit watch.

S&P affirmed Kiwibank owner NZ Post Group's AA- rating but dropped the state-owned company's ratings outlook from stable to negative.

However, it wasn't Kiwibank S&P was concerned about; NZ Post chief executive Brian Roche said the agency had dropped the group's outlook due to the continuing decline in its mail business.

"New Zealand Post is well positioned to deliver on a sustainable physical network, growing the bank, creating a digital future and a superior customer experience," he said.

Fitch said it had placed the big four Australian banks - ANZ, Commonwealth Bank (which owns ASB), Westpac and National Australia Bank (BNZ) - on ratings watch negative (RWN) due to concerns about their reliance on short-term funding from overseas.

Any cut in credit ratings for the big banks would be limited to only one notch, it said.

The warning followed a review of the Australian and Canadian banking sectors, which found the banks in both countries are "justifiably highly rated" but the Australian major banks' ratings are "under some pressure" at their current levels.

"Specifically, the RWN for the four major Australian banks largely reflects Fitch's view that despite significant improvements, these banks continue to have a weaker funding profile than other similarly rated peers."

Fitch's ratings for CBA, Westpac and NAB are at AA, while the rating for ANZ is AA- due to that bank's expansion into Asia.

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