S&P downgrades 23 financial institutions

S&P downgrades 23 financial institutions

Ratings agency Standard & Poor's has downgraded the credit ratings of three of Australia’s largest non-major banks and 20 other financial institutions.


In a statement released yesterday, S&P warned that Australian lenders now face an “increased risk” of a significant housing correction.

S&P also said economic imbalances in Australia have increased due to strong growth in private sector debt and residential property prices in the past four years, notwithstanding some signs of moderation in growth in recent weeks.

“Consequently, we believe financial institutions operating in Australia now face an increased risk of a sharp correction in property prices and, if that were to occur, a significant rise in credit losses.”

S&P has lowered its assessment of the standalone credit profiles of almost all financial institutions operating in Australia.

The ratings agency pointed to the Sydney and Melbourne property markets, where it believes continued price growth has led to “the risk of a sharp correction” in property prices.

With residential home loans securing about two-thirds of banks' lending assets, S&P believes the impact of a housing correction on financial institutions would be amplified by the Australian economy's external weaknesses, in particular its “persistent current account deficits and high level of external debt”.

S&P has downgraded the ratings of AMP Bank (A+ to A), Auswide Bank (BBB to BBB-), Bank of Queensland (A- to BBB+), Bendigo and Adelaide Bank (A- to BBB+), Credit Union Australia (BBB+ to BBB), Defence Bank (BBB+ to BBB), G&C Mutual Bank (BBB to BBB-), Greater Bank (BBB+ to BBB), IMB (BBB+ to BBB), Liberty Financial (BBB to BBB-) ME Bank (BBB+ to BBB) MyState Bank (BBB+ to BBB) and many others.  

Meanwhile, S&P has affirmed its issuer credit ratings on the major banks, reflecting the agency’s expectation of “timely financial support from the Australian government if needed”. However, the big four remain on negative outlook based on potential pressures on government support.

Read more:

Major bank hybrids downgraded

Bank levy to cost Westpac $260m a year

Colonial First State wraps add managed accounts

Australian wage growth at ‘record low’

CommInsure changes underwriting service

Related Articles

 

S&P downgrades 23 financial institutions
investordaily image
ID logo
promoted stories

Appointments

David Cullen

AMP appoints new group general counsel

Reporter

Matt Brown

Australian Unity hires former ANZ Wealth exec

Reporter

Deanne Stewart

First State Super announces new CEO

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