Bank profit growth to slow
(25 March 2008 – Australia) In a review of Australia’s financial institutions, Standard & Poor’s has indicated that profit growth for Australia’s big banks will slow.
S&P indicated that higher funding costs will also result in a slow down in balance sheet expansion, despite an otherwise strong position.
The big four banks, which have been reaffirmed as AA rating banks, should not experience a deteriorated credit profile, while lenders in the BBB category could feel a greater impact.
S&P indicated a number of reasons for the strength of the big banks.
Firstly, the industry’s bad and doubtful debts are likely to be lower than similarly rated international banks.
Also, S&P analyst Sharad Jain indicated that most financial institutions were proactively managing the wholesale funding challenges present in the current market.
He also said that with market uncertainty set to continue, a downside outlook has been factored into ratings.
However, he said that the big four banks were well placed to cope with this due to their diverse funding sources and earnings.
The big four banks, which have been reaffirmed as AA rating banks, should not experience a deteriorated credit profile, while lenders in the BBB category could feel a greater impact.
S&P indicated a number of reasons for the strength of the big banks.
Firstly, the industry’s bad and doubtful debts are likely to be lower than similarly rated international banks.
Also, S&P analyst Sharad Jain indicated that most financial institutions were proactively managing the wholesale funding challenges present in the current market.
He also said that with market uncertainty set to continue, a downside outlook has been factored into ratings.
However, he said that the big four banks were well placed to cope with this due to their diverse funding sources and earnings.
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