Moodys downgrades NZ banks

Moody's has downgraded New Zealand's big four banks by one notch, due to concerns around wholesale funding.

Monday, May 30th 2011, 8:53AM

The long-term senior unsecured ratings for ANZ National, ASB, BNZ and Westpac have gone from Aa2 to Aa3.

The rating action follows the 1-notch downgrade of their respective Australian parent banks.

The outlooks on all ratings are now stable.

"The 1-notch downgrade of ANZ National, BNZ and Westpac's reflects the ongoing impact of the challenging economic environment in New Zealand, which has resulted in asset quality metrics continuing to deteriorate -- albeit at a slower pace -- beyond minimum expectations for the banks' ratings at the bottom of the credit cycle," Moodys says.

The local economy remains subdued, with GDP growth now forecast to show stronger growth in the year to March 2013, a year later than forecast last year," Moodys Assistant Vice President Marina Ip says.

ANZ National maintains a concentration in rural lending, whilst Westpac has a concentration to commercial property, both sectors are experiencing stress. Although BNZ has a diversified corporate loan portfolio, the bank does have relatively high single name borrower concentrations due to its higher proportion of corporate/institution lending.

New Zealand major banks are structurally sensitive to wholesale funding market conditions. The major banks have around 40% of their total funding base sourced from wholesale funding, with around two-thirds of this being sourced offshore.

"Over the past six-months, the major banks have enjoyed relief in funding pressure due to slower loan growth and higher customer deposit growth. The increased savings rate was supported by lower credit and consumption growth combined with moderate income growth. However, we believe this dynamic is not sustainable in the long-term.

« ASB's mortgage book shrinks again

Kiwibank's profit plunges as bad loan charges soar »

Special Offers