Fitch affirms AA- credit ratings for big four banks

Fitch Ratings, the global rating agency, affirmed the credit ratings of New Zealand's four major Australian-owned banks, saying they have conservative risk appetite, strong profitability and sound asset quality that's expected to continue through this year.

The AA- credit ratings with stable outlook for ANZ Bank New Zealand, ASB Bank, Bank of New Zealand and Westpac New Zealand were affirmed in the Fitch review, which said if any of the lenders needed support, there was an extremely high likelihood their parent groups would provide it.

"The affirmation of their viability ratings (VR) reflects their conservative risk appetites and robust risk management practices, as well as their strong domestic franchises and consistently health operating profitability," Fitch said in its report. "The VRs also consider the banks' sound capitalisation and improved funding positions."

Last month Fitch said New Zealand's lenders were on a stable footing in 2015, with the country's economic momentum expected to underpin solid earnings in the period.

The rating agency today said New Zealand's major lenders have some of the highest net interest margins in the world and the most efficient cost management compared to their peers, though operating income could come under pressure as competition for asset growth intensifies.

The lenders' asset quality is expected to remain sound this year, though Fitch noted risks around a sudden external shock weighing on commodity prices, a sharp rise in interest rates and a reduction in underwriting standards in pursuit of growth.

Fitch said the ratings could come under pressure of the lenders' capitalisation weaken significantly in the face of strong loan growth or the deterioration of asset quality, or could get hit by a downturn in New Zealand's major trading partners of China or Australia.

The rating agency said upgrades were unlikely because of the lenders' concentrated lending in New Zealand and their funding profiles, which are weaker than their international peers.

(BusinessDesk)