Moody's revises its outlook on the big 4 NZ bank's credit ratings to negative from stable in line with same move made on their Aussie parents

Moody's revises its outlook on the big 4 NZ bank's credit ratings to negative from stable in line with same move made on their Aussie parents

Credit rating agency Moody's has revised the outlook on its Aa3 ratings on New Zealand's big four banks - ANZ NZ, ASB, BNZ and Westpac NZ - to negative from stable in line with moves made to their Australian parents' ratings.

Earlier, Moody's affirmed its Aa2 ratings on the Australian parents of NZ's big four banks, but revised their rating outlooks to negative from stable.

"The outlook change for Australia's four major banks reflects Moody's expectation of a more challenging operating environment for banks in Australia for the remainder of 2016 and beyond, which could lead to a deterioration in their profit growth and asset quality, as well as an increase in their sensitivity to external shocks," Moody's said.

"In particular, the rating action reflects (a) Australia's ongoing economic transition which, despite stable aggregate economic growth, has resulted in low nominal income and wage outcomes and persistently low interest rates, exerting in turn downward pressure on the banks' profit growth; (b) Moody's continued concerns regarding the banks' exposure to tail-risks in the Australian housing market, which has been characterised over the recent past by strong price appreciation and rising household debt; and (c) rising bad debt within parts of the banks' lending portfolios, in part reflecting these pressures."

Moody's has also lowered its outlook for the Australian banking system, rated Aaa, to negative from stable.

See credit ratings explained here.

Here's Moody's statement on the NZ banks

Moody's Investors Service has today revised to negative from stable the outlooks on the ratings of the four major New Zealand banks.

The banks affected are ANZ Bank New Zealand Limited, ASB Bank Limited, Bank of New Zealand and Westpac New Zealand Limited.

At the same time, Moody's has affirmed the four banks' Aa3 long-term senior unsecured debt ratings, together with all their other ratings, at their existing levels.  

The outlook change follows Moody's decision to revise to negative from stable the outlooks of their respective Australian parents, Australia and New Zealand Banking Group Limited (Aa2 negative, a1), Commonwealth Bank of Australia (Aa2 negative, a1), National Australia Bank Limited (Aa2 negative, a1) and Westpac Banking Corporation (Aa2 negative, a1), as announced on 18 August 2016.

For more information on the rating actions on the Australian parent banks, please visit their respective issuer pages on www.moodys.com. 

Outlooks, which provide an opinion on likely rating direction over the medium term, are assigned only to banks' long-term deposit, issuer and senior unsecured debt ratings. 

A list of all affected ratings is provided at the end of this press release. 

RATINGS RATIONALE 

The change in the four banks' rating outlooks to negative from stable follows the same change in the rating outlooks to negative for their respective parents. 

Moody's incorporates two notches of affiliate support uplift into the Aa3 long-term ratings of the four banks, given Moody's assessment of a very high likelihood of support from their Australian parents. 

The affirmation of the ratings reflects the strong financial profiles of the four banks. Bank asset quality is currently very strong, profitability has improved, and capital remains robust. 

These favorable characteristics provide the banks with a strong buffer to withstand the stress arising from a potentially more challenging operating environment during 2016-17.

Moody's expects credit conditions for the banks to weaken as credit growth and household leverage continue to rise, increasing sensitivity to shocks, and against a backdrop of weaker economic growth and rising stress in the dairy sector. 

WHAT COULD CHANGE THE RATING UP/DOWN 

A downgrade of the Australian major banks' a1 baseline credit assessments would likely result in a downgrade of the long-term ratings of the four major New Zealand banks. 

Conversely, the outlooks on the four banks are likely to return to stable if the outlooks on their respective Australian parents are revised to stable.  

A material weakening in the financial fundamentals of the New Zealand banks would also be negative for the bank's ratings.

And here's a statement from ANZ NZ

ANZ Bank New Zealand Limited (ANB) today confirmed that Moody’s decision to revise Australia’s macro profile has resulted in a change in the outlook for the major Australian and New Zealand banks, including ANB, from stable to negative. 

Moody’s reaffirmed ANB’s Aa3 long-term senior unsecured debt ratings moving from Aa3 (Outlook Stable) to Aa3 (Outlook Negative) saying it expected a potentially more challenging operating environment for the banks for the remainder of 2016 and beyond.

All other ratings remain at their existing levels.

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16
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Domestic bank deposit rates need to move up in line with foreign wholesale funding costs to reflect the challenging risk circumstances bank managers and their regulator, the RBNZ, have allowed banks to expose themselves.

10
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Yes 230billion household debt rising at 8.8% per annum. Nothing to be proud of.

Funny.. is that the same growth figure as house prices nationally? hmmm...

When Aussies catch a cold, NZ sneezes and all that ?
Or the Chickens coming home to roost, pun intended.

Is the Government taking any notice ... Housing Bubble Deflation or Collapse?

might have to consider taking my deposits out, as with OBR creditors can be paid out ahead of depositers

if too many start doing that then what. already banks are having to increase interest rates to get the money in to lend.
it may force them to cut back on credit growth then the whole house of cards could tumble

If the big 4 banks keep getting their credit ratings cut there's only one way the interest rates will go.

the house of cards will tumble sharetrader, you use the perfect metaphor

...done. Sitting in AUS.

Of course Moody's did... not that their opinions count for much anyway -

These are the same clowns that rated CDO's AAA+ with a direct conflict of interest with the people selling them... all of which led to the GFC and blew up in everyone's faces...
Then testified in front of US congress with a rudimental defense saying it was only their 'opinion'

How any of these white collar criminals get away spoon feeding their blessed 'ratings' while denying any accountability for their misrepresentation and conflict of interest with it is beyond me....!

No no, there is no bubble. Banks will be fine. This environment isnt a slow slide to a depression (thanks to endless QE and endless rate cuts). No ofcourse not. Lol...

So what would Moodys be mentioning to folk on the Terrace, over a cup of tea. Big Picture.

We know that import substitution and industrialisation didn't work.
Even as primary school children we got into trouble asking the GM assembly manager why he made cars nobody wanted (he was standing beside a Vauxhall Viva at the time).

We know that import of raw materials and/technology into export of commodities doesn't work.
Being the Think Big stuff. Al smelter, Gas to gasoline. Our cousin's ford fairlane (with mags) blew up cause of the CNG.

We know that importing capital as bank debt or non resident alien's buying existing assets or housing stock doesn't work (as Ozz RBA man retiring Glenn Campbell said on the way out).

We know the idea of off shore funds mgt a la HK and Lion City doesn't work (Ken and Co not quite up to the task).

How do we get the R&D going here to build enduring businesses. The thing the Koreans and Taiwanese do. LG etc...
Is it because we have no banks. Just building societies - more true as the societies carry the last lost.
Do these mortgage managers know what a business plan is?

Quite right Henry, well said.

Someone reminded me of Colin Murdoch the other day. Narrow minded thinking saw the profits from his invention of the disposable syringe disappear offshore to Australia. http://www.k-online.com/cgi-bin/md_k/lib/pub/tt.cgi/Made_in_New_Zealand_...

Would a guy like him find it any different today? Why would you put venture capital into something like that when you can make (apparently) risk free and tax free capital gains in housing.

So if the Reserve Bank had been enforcing more realistic capital adequacy ratios, maybe the banks would be in more sound condition. This is something that needs to be worked at and maintained continuously, it is far too late to try and magic it up at the last minute.

It is almost as if the Government want a bank collapse and OBR events? Could it be part of some cunning plan to engineer banking collapses so that New Zealand can regain possession of the banks? It certainly would save getting close to $5b leaving the country. If it is not their plan then maybe it would be a good way of turning a potential disaster to our advantage.

Kiwibank just informed me they are cutting rates on their notice saver accounts. As the only government backed bank it seems they are beginning to abuse that position. I.will be walking. It's increasingly looking like the pendulum is swinging to favour the lender over the borrower.

I wonder how much longer the ponzi can go on?

spot on....that's the question, when, not if it will collapse

2018.........kerplunk! (my estimate)

In 2018 all the cheap new build housing might go down in value...and maybe some more undesirable areas (you know where they are in Auckland)...however inner city Auckland - Ponsonby villas etc will flatten but not go down in value, ..that's my bet....any takers? villas will be flat, new build crap will go down in 2018 in Auckland...As much as we love to hate our drafty antique villas, the fact is you cant replace them!

Chinese Media Is Now Warning Canada’s Housing Crash Will Be Worse Than The US
https://betterdwelling.com/city/vancouver/chinese-media-now-warning-cana...

Is it because Monetary Policy around the World is failing? And the likes of Moody's & Fitch ect ... don't want to be on the wrong side of history again like they were in the GFC? What Banks aren't printing money these days is the question to be asked. What government isn't buying poor performing assets, Bank products too that the banks trade for cash, bonds and then try to unload onto an unsuspecting buyer in a hedge fund or mutual fund? We're due for another crash, its just a matter of when, how deep and for how long? 2017/2018. 10yrs+ ....change of government might help?