Global financial services passes S&P medical
(12 July 2004 – Global/Australia) Ratings agency Standard & Poor’s has taken the pulse of the financial services sector worldwide and given it a clean bill of health.
S&P said likelihood of government intervention in the financial services sector was generally low but that China stood out as being potentially vulnerable to future stress.
The ratings agency said that rising household debt and house prices were the leading indicators of potential stress and that a hike in interest rates, unemployment and a drop in house price could see banks suffer a hard landing.
However, S&P predicted a more moderate slowdown for economies in Australia, UK, UK, Spain and Ireland.
Australian based credit analyst Gavin Gunning said a confluence of factors over recent years, including strong asset growth by banks, increasing private-sector indebtedness, and strongly increasing house prices, provided indications that the Australian banking sector is heading into a more challenging environment.
"The most likely scenario is that potential stress affecting the banking sector will be manageable at current rating levels, although Standard & Poor’s will be monitoring for institutions more vulnerable to industry sensitivities," he said.
"Australian banks currently demonstrate very good asset quality and profitability by international standards, hence there is some scope for deterioration in bank lending volumes and asset quality before Australian bank ratings are affected," Gunning said.
S&P said the corporate sector currently appeared less vulnerable to a credit bust than during the 1990s.
The ratings agency said that rising household debt and house prices were the leading indicators of potential stress and that a hike in interest rates, unemployment and a drop in house price could see banks suffer a hard landing.
However, S&P predicted a more moderate slowdown for economies in Australia, UK, UK, Spain and Ireland.
Australian based credit analyst Gavin Gunning said a confluence of factors over recent years, including strong asset growth by banks, increasing private-sector indebtedness, and strongly increasing house prices, provided indications that the Australian banking sector is heading into a more challenging environment.
"The most likely scenario is that potential stress affecting the banking sector will be manageable at current rating levels, although Standard & Poor’s will be monitoring for institutions more vulnerable to industry sensitivities," he said.
"Australian banks currently demonstrate very good asset quality and profitability by international standards, hence there is some scope for deterioration in bank lending volumes and asset quality before Australian bank ratings are affected," Gunning said.
S&P said the corporate sector currently appeared less vulnerable to a credit bust than during the 1990s.
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