Moody's downgrades banking outlook

Moody's downgrades banking outlook

The rating outlooks for five Australian major banks have been revised to negative by research house Moody’s Investors Service.


The banks in question, ANZ, Commonwealth, NAB, Westpac and ME Bank, have had their outlooks downgraded based on “Moody’s expectation of a more challenging operating environment” in the future.

“The rating action reflects Australia's ongoing economic transition which, despite stable aggregate economic growth, has resulted in low nominal income and wage outcomes and persistently low interest rates, exerting in turn downward pressure on the banks' profit growth,” the company said.

Exposure to housing market tail-risks was also cited as a cause for the revised outlooks, with Moody’s noting the market’s “strong price appreciation and rising household debt” in recent times.

“Despite the macro-prudential measures put into place by the Australian regulatory authorities in 2015, which have had some success in shifting the composition of residential property lending towards less risky products, house prices and debt levels remain at historically high levels,” it said.

Moody’s said there was unlikely to be any “upward pressure” on the rating outlooks for the five listed banks over the medium term, but noted “their outlooks could be revised to stable” should household metrics, leverage and income stabilise.

The balance sheet settings of 13 other banks, including HSBC Bank Australia, Macquarie Bank, Suncorp-Metway and Teachers Mutual Bank, were considered by Moody’s “sufficient to withstand deteriorating operating conditions at their current credit rating levels”.

Read more:

Perpetual LIC doubles profit

Blue Sky reports solid growth for 2015-16

Blockchain no ‘panacea’, warns Deloitte

Banks facing US legal action over BBSW

IRESS reports increase in wealth revenue

 

Related Articles

 

Moody's downgrades banking outlook
investordaily image
ID logo
promoted stories

Appointments

Chris Wu

T Rowe Price appoints investment analyst

Reporter

Karen McKeown

Local Government Super appoints director

Reporter

Neil Cochrane

First State Super CEO to retire

Reporter

Analysis

investordaily image

Corporate governance and advocacy in China

Therese Niklasson

Dug Higgins

The shifting LIC landscape

Dug Higgins

investordaily image

The perils of chasing niche infrastructure

Frithjof van Zyp