S&P assigns lowest risk to Australian banking industry, re-rates 20-plus banks

John Kavanagh

S&P Global Ratings has upgraded the ratings of more than 20 Australian banks and other lenders, after forming a view that “continued strengthening of regulatory and governance standards in the Australian banking sector has reduced industry-wide risks”.

S&P said it has assessed the institutional framework for the Australian banking industry at the lowest risk level on its scale, alongside Canada, Hong Kong and Singapore.

“Simplified business models and advances in risk management have also contributed to this improvement,” it said.

The issuer credit ratings for the major banks and Macquarie Bank are unchanged, while their standalone credit profiles have been upgraded. Issuer credit ratings are more significant from an investor point of view.

Ratings for the big banks’ additional tier 1 and tier 2 capital instruments were also upgraded.

Issuer credit ratings for some smaller banks were also unchanged. These are Australian Unity Bank, HSBC Bank Australia, ING Bank (Australia), Members Banking Group and Suncorp Bank.

“The overall creditworthiness of the respective groups to which these banks belong limits the upside to our ratings on them, despite improved standalone credit profiles.,” S&P said.

In other cases, ratings were unaffected by the improvements in the institutional framework. These were Citigroup Pty Ltd, Export Finance Australia, Goldman Sachs Financial Markets Pty Ltd, Housing Australia, JP Morgan Securities Australia Ltd, Norinchukin Australia Pty Ltd and Orix Australia Corp.

Judo Bank, whose issuer credit rating was upgraded from BBB-/positive/A-3 to BBB/stable/A-2 said in a statement that the upgrade would enhance its access to funding.