Moody's revises ratings outlooks of Big Four banks to negative

Friday, 19 Aug 2016 08:22:48 | Thuy Ong

Moody's expects challenges to remain for 2016 and beyond. (ABC News: Gregory Nelson)

Credit ratings agency Moody's has revised its outlook on the Big Four banks to negative, citing challenges in the operating environment and to profit growth as reasons for the downgrade.

Moody's said the outlook change reflected the expectation for challenges in the remainder of 2016 and beyond for the Commonwealth Bank, NAB, ANZ and Westpac, which could lead to a deterioration in profit growth and asset quality and an increase in sensitivity to any external shocks.

Moody's said the rating action reflected:

Australia's ongoing economic transition which has resulted in low income and wage outcomes and persistently low interest rates, which pressures the banks' profit margins
Concerns regarding the banks' exposure to tail-risks in the Australian housing market with strong price appreciation and rising household debt
Rising bad debt within parts of the banks' lending portfolios

"Despite these headwinds, Australian banks maintain strong buffers in terms of capital, improved liquidity profiles, and structurally high profitability," Moody's said in the report.

"Their outlooks could be revised to stable if the operating environment in Australia improves, with a stabilization in household leverage, nominal income and house price metrics, and/or these banks further improve their capitalisation and funding profiles."

Falling credit quality has been well telegraphed in banking circles, with recent earnings results highlighting how bad debts have affected bottom lines.

The Big Four are already under pressure as 17 banks and two international broking houses have launched a class action relating to the alleged rigging of the bank bill swap rate (BBSW) and bank trading in the United States.

Earlier this week Moody's affirmed Australia's AAA credit rating, saying it expects Australia's economic "resilience to endure in an uncertain global environment".

AustraliaPlus

About Us
|
Terms of Use
|
RSS
|
Privacy Policy
|
Contact Us
|
Shanghai Call Center: 962288
|
Tip-off hotline: 52920043

沪ICP证：沪ICP备05050403号-1
|
互联网新闻信息服务许可证：31120180004
|
网络视听许可证：0909346
|
广播电视节目制作许可证：沪字第354号
|
增值电信业务经营许可证：沪B2-20120012

Moody's revises ratings outlooks of Big Four banks to negative

Email this to your friend