Moody’s downgrades big four to Aa2
(20 April 2011 – Australia) Ratings agency Moody’s downgraded Australia’s ‘big four’, cutting the long-term senior unsecured debt ratings down to Aa2.
This was the first wholesale downgrade of the banking sector in more than a decade by a ratings agency.
Since 2007, ANZ, Commonwealth, National Australia Bank and Westpac have been rated by Moody's as Aa1, although the agency placed the sector on review in February, warning of the possible cut.
Moody's senior vice-president, Patrick Winsbury said the downgrade reflected Moody’s view of the Australian banking system's structural sensitivity to conditions in wholesale funding markets.
Australian banks are seen by many analysts as being among the biggest users of wholesale funding among global banks.
On average, their deposits only fund 60 percent of their lending book, meaning they have to borrow tens of billions of dollars from global money managers to meet the shortfall.
But Moody's noted the banks were taking steps to reduce their use of wholesale funding. At the same time, the subdued outlook for credit growth in Australian has further decreased their funding needs.
A few weeks ago, the big four reported combined first-half profits of A$12 billion, a 13 percent increase on last year's results. These banks are just a handful in the world that carry an AA rating, one of the highest used by ratings agencies Moody's and S&P in assessing the health of banks.
Since 2007, ANZ, Commonwealth, National Australia Bank and Westpac have been rated by Moody's as Aa1, although the agency placed the sector on review in February, warning of the possible cut.
Moody's senior vice-president, Patrick Winsbury said the downgrade reflected Moody’s view of the Australian banking system's structural sensitivity to conditions in wholesale funding markets.
Australian banks are seen by many analysts as being among the biggest users of wholesale funding among global banks.
On average, their deposits only fund 60 percent of their lending book, meaning they have to borrow tens of billions of dollars from global money managers to meet the shortfall.
But Moody's noted the banks were taking steps to reduce their use of wholesale funding. At the same time, the subdued outlook for credit growth in Australian has further decreased their funding needs.
A few weeks ago, the big four reported combined first-half profits of A$12 billion, a 13 percent increase on last year's results. These banks are just a handful in the world that carry an AA rating, one of the highest used by ratings agencies Moody's and S&P in assessing the health of banks.
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