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Fitch downgrades ANZ NZ, ASB, BNZ and Westpac NZ credit ratings by one notch alongside those of their Aussie parents and gives new ratings a negative outlook

Fitch downgrades ANZ NZ, ASB, BNZ and Westpac NZ credit ratings by one notch alongside those of their Aussie parents and gives new ratings a negative outlook

International credit ratings agency Fitch has downgraded New Zealand's big four banks, alongside their Australian parents, by one notch to A+ from AA-.

Fitch says the downgrades reflect the significant impact government measures to limit the spread of the coronavirus will have on the four banking group's Australian and New Zealand operations. Fitch has also placed a negative outlook on the ratings, reflecting its assessment that there remains considerable downside risk to its base case that could result in a further deterioration of the banks' financial profile beyond its expectations over the next two years.

The downgrades for ANZ NZ, ASB, BNZ and Westpac NZ, alongside those of their Aussie parents the ANZ Banking Group, Commonwealth Bank of Australia, National Australia Bank and the Westpac Banking Group, means their ratings remain equalised with those of their parents.

Fitch expects the Australian economy to contract by over 2% in 2020, with unemployment averaging 7.7% for the year. Fitch says the NZ subsidiaries remain a key and integral part of their respective banking groups, with strong integration across management, risk frameworks and internal systems. 

Lower credit ratings can increase borrowing costs for a rated entity. See credit ratings explained here.

In response to the downgrade ASB said its capital and funding positions remain strong.

"As at the last reported disclosure date, 31 December 2019, ASB’s Tier 1 Capital Ratio was 11.7% versus a regulatory minimum of 4.5%. As at 31 March 2020, ASB’s Core Funding Ratio was 89.5% versus a regulatory minimum of 50%," ASB said.

Here's a statement from Fitch.

Fallout from Coronavirus Drives Downgrades of Large Australia, NZ Banks

Tue 07 Apr, 2020 - 04:19 ET

Fitch Ratings-Sydney-07 April 2020: Fitch Ratings' downgrade of the Issuer Default Ratings (IDRs) of Australia's four largest banking groups and their New Zealand subsidiaries to 'A+'/'F1' from 'AA-'/'F1+' reflects the agency's expectations of a significant economic shock in 1H20 due to measures taken halt the spread of the coronavirus, followed by a moderate recovery through 2021.

Fitch's economic forecasts are outlined in Fitch Ratings Coronavirus Scenarios: Baseline and Downside Cases and Global Economic Outlook - COVID-19 Crisis Update April 2 2020.

The ratings on the banks had limited buffers at the previous levels, as reflected in a Negative Outlook on the IDRs, with an economic shock and further profitability weakness as stated downgrade triggers in recent reviews. Buffers are more substantial at the new rating. Nevertheless, further downside risk remains to our baseline case, which is why a Negative Outlook has been retained on the ratings. Details of the actions can be found in the individual Rating Action Commentaries published on 7 April 2020. The affected entities are:

Australia and New Zealand Banking Group Limited
- ANZ Bank New Zealand Limited
- Senior debt issued by ANZ New Zealand (Int'l) Limited
Commonwealth Bank of Australia
- ASB Bank Limited
- Senior debt issued by ASB Finance Limited
National Australia Bank Limited
- Bank of New Zealand
- Senior debt issued by BNZ International Funding Limited
Westpac Banking Corporation
- Westpac New Zealand Limited
- Senior debt issued by Westpac Securities NZ Limited

Fitch has revised the outlook on the operating environment score for banks in both Australia (aa-) and New Zealand (a) to negative from stable as part of this action. The agency expects GDP to shrink in both markets in 1H20, with only a modest recovery starting in 2H20 and extending into 2021. Unemployment is likely to spike sharply and remain very elevated relative to pre-pandemic levels even after the recovery is underway. The current operating environment scores incorporate this base case and the outlook on this factor would likely be revised to stable should the baseline case scenario eventuate. Conversely, a significant extension of the downturn into 2H20, or only a shallow recovery that results in much weaker economic conditions through 2021 and beyond could result in a reduction of the score in both markets. The implications, per Fitch's criteria, are that we would expect banks to maintain stronger financial profiles - particularly for key financial metrics - than is the case with an operating environment assessment in the 'aa' category.

We expect these conditions to affect asset quality and earnings in particular, with the mid-points of both factors reduced by a notch for the large Australian banks, with negative factor outlooks. Support measures implemented by the government, regulators and banks themselves should alleviate some of the asset-quality pressure that will emerge from this downturn, particularly within the next six to 12 months.

However, we expect that a portion of businesses will fail to restart once the recovery begins and some households will not be able to resume debt repayments after the repayment holidays provided by the banks. As a result, asset-quality metrics will likely weaken from current levels over the next 12-18 months and, for the four large Australian banks, we expect them to no longer be consistent with a 'aa-' factor score. Stage 3 loans ranged from 0.9% to 1.3% of gross loans at the most recent year-end for these banks. Fitch's typically expects these ratios to be sustainably under 1% to be consistent with a score in the 'aa' range, although the Australian and New Zealand banks benefit from a high level of secured lending, which should help limit losses.

Earnings will face pressure from both higher impairment charges and lower interest rates. The central banks in Australia and New Zealand have cut their respective cash rates to 0.25% and indicated that they will remain there for a prolonged period. The banks' earnings were already vulnerable before the pandemic hit, which was reflected in the negative outlook on the factor. The challenges from the outbreak are likely to exacerbate this pressure.

Capitalisation of these banks will be affected by the weaker asset quality, but buffers built in recent years should be sufficient at current scores under our baseline case, and we have retained a stable outlook for this factor. Funding and liquidity is supported by sound liquidity management and the significant support provided by the Australian and New Zealand central banks, with limited short-term pressure likely. The outlook for this factor remains stable as a result. The funding and liquidity scores for all banks are already lower than their respective Viability Ratings reflecting a high reliance on offshore wholesale funding.

Fitch reviewed the four large banks in Australia and New Zealand ahead of the rest of the portfolio as the outlooks on the IDRs were already Negative, indicating greater susceptibility to a downgrade at their relative rating levels and a higher likelihood that they would hit previously stated downgrade sensitivities. In addition, the banks combined account for a significant majority of banking system assets in both markets. We will review the remaining Australian and New Zealand banks rated by Fitch in the near future.

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Just off to check whether our deposit rate has gone up....

S & P downgrade Australia

Fitch? .. I really don't wish Corona on you.. but your ratings.. really downgraded my FIRE economy outlook here.
Suddenly, those Sharia banks (profit sharing, non-interest) & Cooperative/Farm-Agriculture-Nature based produce banks? seems more appealing than banks on FIRE books.

I am very familiar with Sharia banks. They are the exact same as your FIRE banks with some appearance appeasing practices to pretend that there is no interest charging involved.
A true Sharia bank will be an investment organisation. Person A provides the capital, person B does the work and their share the profits according to the agreement. You already have investment entities. And there is a reason why they are no the prevalent form of financing businesses: they truly suck.

Well? let's say they both sux, eg.. like you said B does the work say.. as 'essential service of landlord'/RE part of industry. How about the last one? it is a banks/co-op but not solely into FIRE.
The one that helps you to taste a nice coffee with milk, eat sufficient protein from meat/fish then all those fresh nice fruit/veges. They sure can't escape FIRE equations, just not too much into it.


We have over a million people on the wage support scheme here in NZ and it's taken this long for a single ratings agency to make a move. Shambles.


And investment properties being propped up with the Accommodation Supplement, to boot.


I think the GFC thoroughly highlighted the flaws in the ratings system. It's a rigged game.

They have 6 months (or more) to slowly step down the ratings into the Bs before mortgage holidays and wage supplements end. It would look bad for them if they went too far too soon and overshot rather than playing catch up. I would be shocked if a bank failed in the next few months there is no price discovery on houses or defaults at the moment.

I was concerning of RBNZ's quantitative easing programme and mortgage holiday will cause banks' credit rating downgraded, eventually will push interest rates go up. It is happenning now. Watch out! House owners!


Yep. Anyone that just overpaid for a house in the last 6 months could be in for a real roller coaster ride. Fix as long as you can now and pray in 3-5 years that a financial miracle has occurred. Aka the everything bubble is maintained. I would suggest there are more interested in it popping than being maintained. Could be a really interesting election topic....oh yes not far away now!!!.

Advise to Kiwis: When your deposits due in those NZ/OZ banks branch? transfer it, put it into your daily accounts/break that online instructions for auto-reinvest (bullshit interest anyway), I personally read/anticipated this the past 4years, so never put deposits in more than 9mths, now make it all 'liquid' more than deposits eg. cheque account, break your long term deposit (observe/ignore the penalty), break into smaller chunks, spread within banks (US banks, ASEAN banks), don't put too much on NZ OZ branch bank (but if you can put it into OZ direct? at least they gave 250k guarantee/why not?), consolidate your FIRE exposure leverage, downgrade/minimise it. Keep the bare home necessities, other/tertiary 'RE investment?' is too risky.
Now, the likes of Banks; Co-op, Sharia (profit/risk sharing) started to appeal more - see from EU, HSBC, SCB/Standard Chartered Bank and Specially you Rabo, for your agriculture/farm loan book (rather than FIRE) I've my eyes on you since 2005 - you'll be the influx recipients of these failing OZ/NZ banks, backed only by CCP direct 'RE investment' - Anyone can see OBR shadow coming yet? not yet probably, But honestly - all of you should read the signs prior, how long ago when the Orr's team advises to spend, spend, spend? as oppose to prepare umbrella before rainy day.. the OCR reduces further as means to 'stimulate' the growth to be leveraged against further productive FIRE economy, now? when all the future phantom papers of wealth has been thrown at this health pit horror? borrow, QEs, subsidy upon subsidy.. but where all those from? and for how long? are they from those 'current paper RE wealth reserve' yet? - not yet at this point, but it's increasing towards that.. The Farm/Agriculture/Fresh produce seems the likelihood winner in the end, as those RE bricks are less important than world appetite for food based survivals or the healthcare/well being.

I think I get the gist of what you are saying, and of course, Rabobank's parent is larger than the Aussie parent of 'our' largest bank, ANZ. Add that to the fact they lend to food producers ( in all the places that have an outpost) and it makes sense to keep them in mind.
OBR? Bank Guarantees? Meaningless in the grand scheme of things; they are psychological crutches at best, If ever either of those is needed, there won't be a banking system left. Many other courses of action will happen first - bank mergers etc - and nationalisation of the banks as a last resort.
But. Time will tell!
"Borrow as much as you can - and don't spend it! - yet"

Remind me what average depo rates are in ASEAN and US Banks

Spoiler alert, they will not start with a 2. Only a muppet would break out of a TD now unless the needed the cash.

Early this year I checked, the local govt. guaranteed deposit scheme (all of them productive economy, unlike NZ) is just being reduced from x to av x-.6 that when NZ about how much? .. below 2, off course I mentioned less than 9mths, very liquid short term.. as we're all expected/anticipated this current eventuality. dung Spoiler alert.. why do you think ANZ opening up branch there again? - I just advise the herd here in practical advise, how much is it to break it? ... here's a real muppet clue: The best investment in today's situation? is at least the one returning all of your base principal that you've put in, interest/dividend just a nice cherry on top.. if you can still get it though.
Now, it's free choice.. the good old advise still: 'don't gamble things you could not afford to loose' - If you're unsure about it? let others elaborate this link, and explain what all these numbers means:

Best policy now to spread your TDs across the big 4. I see BNZ still has 18 months at 2.65%, last chance over 2.5% I think. 2.5 going going gone.....

I've already done that except with Westpac which, although the Government's bank, still doesn't sit well with me for no particular reason.
I took a 20% hit on my share portfolio the other day but it's come back to 14% right now.
I'm not touching my shares as they give me further diversification and are conservatively invested, except for Z Energy which is down to just under $3.00 despite having a post-virus-ending Morningstar valuation of $8.40! Surely, local road-based tourism and general business-based driving will pick up shortly after lockdown ends, and smug mum's will still be driving Tinkerbell and Charles to school each day in large black gas-guzzling SUVs.
The big thing I have to consider is how and if to help importunate prodigal relatives in the younger age group if necessary.

Used to be like that, you're brave person to have it more than 9mths.. we both couple still got a good payroll, spread the risk.. but already put away all from TD from March, less on the Banks heavy reliance on FIRE economy. Sit wait, watch, identify, eyes nose ears wide open, to react, loss interest? who much they're again? - Last thing you want to know is the rationalisation of what you put in.. now tell me; why RBNZ reduce CAR from 75-50%, delaying it from 5-7yrs, then following my advise to cancel/defer of this Banks deposit guarantee scheme until 2023. I thought? if we're in such 'strong position' those measures could be in place by now.. answer: The same like them, I knew we're into good sounds, but? the force of our liquidity floating water in the river that worry all of us right now. Steady calm waters, heard the rumbling water fall but cannot say from which direction, big enough freak of wave can cause PANIC, now do remember calm waters doesn't make a good sailor/kayaker. But those good sailor/kayaker have all prepared for the rough conditions, Be Very Prepared, Preparation could save your life.

The downgrade will affect the Australian branches more due to having higher levels of off shore funding.

What should concern people more is the rapid change in sentiment. Nothing is reported in the US about people withdrawing money from the banks. The media seems to have a vested interest in not reporting anything looking like a bank run. It's not just fear about toilet paper supplies. Although anyone with money in a US bank should be concerned after going through the GFC.

Remember that this is only two weeks of the Level 4 lockdown. The next two weeks are likely to escalate just as much as the first two.

Just a thought. What would anyone do with it, if they withdrew cash from their bank?
"You can only use electronic payments in the supermarket" is pretty much on the way, and apply that to all purchases - ban cash, in effect, then what do we do with the notes?

I don't think people are withdrawing cash to buy food with, they are withdrawing savings, money that would have been intended for a long term use. They are risk averse and many will be aware how vulnerable banks will be to the housing market crash. And people became risk averse and displaying the psychology of the depression/recession (hoarding) well before any of the lockdowns were announced, as you would expect based on all the behavioural economics research.

It is mattress stuffing money. People have been complaining about $5k or $10k daily withdrawal limits. Also in the US Covid-19 measures are inconsistent across the whole country with places still accepting cash.

I'll keep some in cash, the rest goes into KiwiBond. Only 0.5% interest, but there's a nice ring to "the Queen owes me money".

What is the best way to buy these government bonds without incurring a fee? I asked a bank about them a few days ago, and they wanted to charge me 0.7% to set it up. So effectively I would be making a negative interest rate after their fees are deducted. They claim it was a standard fee, but agreed. I said I would make more by withdrawing the money from the bank and putting it under my mattress, and they didn't disagree.

Buy them through Computershare. No fee whatsoever.

I sent an email to Computershare, they responded in an hour.

I can see all of this happening, which is a version of GFC:
- first signs of runs on the banks
- significant slump of house prices and many housing speculators bankrupt; government implements legislation to support home owners, with only partial effects
- government rushes urgent legislation to cover all deposits on institutions with credit rating higher than say BBB. Probably this time only registered banks are covered - most of the remaining finance companies go belly up
- deflation kicks in and RBNZ gets deeper and deeper into QE, with only limited effect, given the considerable wealth destruction due to the slumping house prices
- government implements "helicopter money"
- recovery starts slowly in mid 2021, but unemployment stubbornly high. Tourism struggling to recover
- government debt up to 40% of GDP, managed with a long period of very low interest rates and slowly increasing taxation (some form of capital gain taxes introduced)

Would that cover be the full amount of bank deposits, or just the $50,000 per person bank? I believe they planned just $50k per bank per person last year, when they were looking at bring in a deposit guarantee.But we don;'t have enough banks to spread larger amounts of savings across all banks. If an elderly couple have 600k saved in low risk TDs for their retirement, they would risk losing a lot, and it could be like the finance company failures all over again.

30K, 50K.. now they canned until 2023? - so can't worry too much now about how many banks out there in NZ, I would study their FIRE economic risk exposure firstly in this instance where their majority loan book goes, that? matters.

Yes in the GFC they wouldnt even let South Canterbury Finance fail (there was too much 'old' money at stake).
The big 4 CANT fail or NZ fails. Too much money in these banks of prominent NZers and Institutions.
The 20% deposit for housing loans for the last few years is now a VERY good thing.

Yes true the 20% loan deposit and the restrictions on LVR will make a big difference. If we are lucky, the average house prices will drop by no more than 20% in the main centers, which will leave not too many in negative equity. I do feel for the most recent FHB's, though.
I will feel a huge sense of relief if house prices decrease by no more than 20%, otherwise the wealth destruction effect will be a very heavy weight on any future recovery. We'll see I guess.
I still see a risk of run on the banks - due to the same psychological factors (collective hysteria) that pushed people to fight for toilet paper in AU supermarkets. Stupidity is contagious at least as much as COVID-19, and irrational behaviour is an important factor in economics - the perfectly rational investor is a figment of economists' imagination.

What's going to be more important after the 6 month mortgage holiday period though?

The equity in the house? or
Ability to pay the mortgage?

Hahaha.... equity in the house???

Ironically it matters most when it's negative.

GFC showed it was the ability to service debt. Probably depends on a bunch of factors including what sector you work in. Example Airline Pilots have gone from blue chip to something else at the moment.

The problem is that house prices should never have been allowed to rise so much in such a short period of time, and be so out of whack with inflation and wages. Economists warned about houses prices being too high for years. If someone does go into negative equity, and they are buying and selling in the same market , it should really affect them. People were more concerned about 'affordability', and the interest rates being continually lowered helped to fuel the prices rises. But nothing is affordable if people don't have jobs to service the mortgage. But I suspect the banks will be worried, because they don't want people owing more to them on their mortgage, than the house is worth. But they should have realised that house prices had risen far too high IMO. At some stage the bubble was going to pop IMO

Too late for the govt & Orr's team, about to tighten up the grip initially, everything so rosy looking, then torpedoed the CullenCGT, DTI what?, now? put it all back on/off board: remove FHB dep requirement, remove LVR, put guarantee of no CGT the next 3-5yrs, put OCR into negative, subsidy, loan holiday.. throw everything into fireplace to get the flame going, watch this movies being played all over the world, will it succeed? - only time can tell.

I see the 5 year term deposit rate in Australia is now only 1.01%, where deposits are guaranteed to $250k by the government. (source

Better than the kiwibond rate at 0.5%

0.75 for 4 yrs. Its close.