Fitch Ratings places big 4 Australian banks and their NZ subsidiaries on credit watch negative

Fitch Ratings is threatening to complete a trifecta of downgrades of the big four Australasian banks, saying they have a weaker funding profile than other similarly rated peers due to their reliance on overseas, wholesale funding.

Fitch has put its ratings on Australia and New Zealand Banking Group and its subsidiary ANZ New Zealand, Commonwealth Bank of Australia and its subsidiary ASB, National Australia Bank and its subsidiary BNZ, and Westpac Banking Corporation and its subsidiary Westpac New Zealand, on ratings watch negative (RWN).

The credit rating agency currently has AA long-term ratings on ASB, BNZ and Westpac NZ and an AA- rating on ANZ NZ.

Like their Australian parents, the big New Zealand banks rely on offshore wholesales markets for about a third of their funding.

Fitch says the four banking groups are are justifiably highly rated.

"Nevertheless, the agency views the Australian major banks' ratings as under some pressure at their current levels."

"Specifically, the RWN for the four major Australian banks largely reflects Fitch's view that despite significant improvements, these banks continue to have a weaker funding profile than other similarly rated peers."

The banks are also subject to many of the same themes and trends as other banks globally including an uncertain macroeconomic environment and evolving regulatory regimes, Fitch says.

"Fitch expects to resolve the RWN within a short time frame and will incorporate an updated view of Australian banks' strengths, weaknesses and trends. The agency expects that any downgrades of the four major Australian banks' ratings are most likely to be limited to one notch with those entities currently rated at 'AA' most at risk."

Fitch's possible downgrades comes after rival Standard & Poor's downgraded the big four Australian banks and their New Zealand subsidiaries by one notch last December to AA- and after Moody's Investors Service cut the New Zealand banks to Aa3 from Aa2 last May.

The rating actions are as follows:

Australia & New Zealand Banking Group (ANZ)

-- Long-Term IDR: 'AA-', on RWN;

-- Short-Term IDR: 'F1+', on RWN;

-- VR: 'aa-', on RWN;

-- Support Rating: affirmed at '1';

-- Support Rating Floor: affirmed at 'A';

-- Government guaranteed debt: affirmed at 'AAA';

-- Unguaranteed senior unsecured debt: 'AA-', on RWN; and

-- Subordinated debt: 'A+', on RWN.

ANZ National Bank Limited (ANZNB)

-- Long-Term foreign currency IDR: 'AA-', on RWN;

-- Short-Term foreign currency IDR: 'F1+', on RWN;

-- Long-Term local currency IDR: 'AA-', on RWN;

-- Short-Term local currency IDR: 'F1+', on RWN;

-- VR: 'a' unaffected;

-- Support Rating: affirmed at '1';

-- Government guaranteed debt: affirmed at 'AA';

-- Unguaranteed senior unsecured debt: 'AA-', on RWN; and

-- Short-term debt: 'F1+', on RWN.

Commonwealth Bank of Australia (CBA)

-- Long-Term IDR: 'AA', on RWN;

-- Short-Term IDR: affirmed at 'F1+';

-- VR: 'aa', on RWN;

-- Support Rating: affirmed at '1';

-- Support Rating Floor: affirmed at 'A';

-- Government guaranteed debt: affirmed at 'AAA';

-- Unguaranteed senior unsecured debt: 'AA', on RWN;

-- Short-term debt: affirmed at 'F1+';

-- Subordinated debt: 'AA-', on RWN; and

-- Preferred stock: 'A', RWN maintained.

Bank of Western Australia (BankWest)

-- Long-Term IDR: 'AA', on RWN;

-- Short-term IDR: affirmed at 'F1+';

-- Support Rating: affirmed at '1'; and

-- Unguaranteed senior unsecured debt: 'AA', on RWN.

ASB Bank Limited (ASB)

-- Long-Term foreign currency IDR: 'AA', on RWN;

-- Short-Term foreign currency IDR: affirmed at 'F1+';

-- Long-Term local currency IDR: 'AA', on RWN;

-- Short-Term local currency IDR: affirmed at 'F1+';

-- VR: 'a' unaffected; and

-- Support Rating: affirmed at '1'.

Colonial Finance Ltd. (CFL)

-- Long-Term IDR: 'AA-', on RWN;

-- Short-Term IDR: 'F1+', on RWN;

-- Unguaranteed senior unsecured debt: 'AA-', on RWN; and

-- Short-Term debt: 'F1+', on RWN.

National Australia Bank Limited (NAB)

-- Long-Term IDR: 'AA', on RWN;

-- Short-Term IDR: affirmed at 'F1+';

-- VR: 'aa', on RWN;

-- Support Rating: affirmed at '1';

-- Support Rating Floor: affirmed at 'A';

-- Government guaranteed debt: affirmed at 'AAA';

-- Unguaranteed senior unsecured debt: 'AA', on RWN;

-- Subordinated debt: 'AA-', on RWN; and

-- Preferred stock: 'A', RWN maintained.

Bank of New Zealand (BNZ)

-- Long-Term foreign currency IDR: 'AA', on RWN;

-- Short-Term foreign currency IDR: affirmed at 'F1+';

-- Long-Term local currency IDR: 'AA', on RWN;

-- Short-Term local currency IDR: affirmed at 'F1+';

-- VR: 'a' unaffected;

-- Support Rating: affirmed at '1'; and

-- Unguaranteed senior unsecured debt: 'AA', on RWN.

Clydesdale Bank PLC (CB)

-- Long-Term IDR: 'A+', on RWN;

-- Short-Term IDR: affirmed at 'F1';

-- VR: 'bbb' unaffected; and

-- Support Rating: affirmed at '1';

Westpac Banking Corporation (WBC)

-- Long-Term IDR: 'AA', on RWN;

-- Short-Term IDR: affirmed at 'F1+';

-- VR: 'aa', on RWN;

-- Support Rating: affirmed at '1';

-- Support Rating Floor: affirmed at 'A';

-- Government guaranteed debt: affirmed at 'AAA';

-- Unguaranteed senior unsecured debt: 'AA', on RWN;

-- Market-linked debt: 'AAemr', on RWN;

-- Short-Term debt: affirmed at 'F1+';

-- Subordinated debt: 'AA-', on RWN; and

-- Hybrid capital: 'A', RWN maintained.

Westpac New Zealand Limited (WNZL)

-- Long-Term foreign currency IDR: 'AA', on RWN;

-- Short-Term foreign currency IDR: affirmed at 'F1+';

-- Long-Term local currency IDR: 'AA', on RWN;

-- Short-Term local currency IDR: affirmed at 'F1+';

-- VR: 'a' unaffected;

-- Support Rating: affirmed at '1';

-- Government guaranteed debt: affirmed at 'AA'; and

-- Unguaranteed senior unsecured debt: 'AA', on RWN.

Westpac Lenders Mortgage Insurance Limited (WLMI)

-- Insurer Financial Strength Rating: 'AA', on RWN