Rating downgrade for NZ's four big banks

The rating downgrade from AA to AA- for the BNZ reflected a change in global rating methodology by Standard and Poor's, BNZ treasurer Tim Main said yesterday.

Ratings agency S&P yesterday revised or reaffirmed new ratings criteria for banks, downgrading all four of New Zealand's big banks to AA- from AA.

Mr Main said the AA- rating continued to reflect BNZ's strong ability to repay principal and interest in a timely manner.

The bank's short-term rating of A1+ was the highest S&P could ascribe to a bank globally and reflected the fact the bank was well capitalised and in a strong position to continue to support customers.

Significant improvements had occurred since 2008 which had seen a strengthening in the bank's balance sheet.

"A higher proportion of customer deposits are now being raised and term wholesale funding has been lengthened and diversified, with a consequent reduction in short term wholesale funding.

"These changes have been accelerated under the Reserve Bank of New Zealand's new liquidity policies and, in particular, under the core funding ratio that requires all banks to maintain a minimum level of stable funding to support lending assets," he said.

Massey University Centre for Banking Studies senior lecturer David Tripe said the impact of the ratings would be relatively small. "It is not as if the banks' positions have changed appreciably," he said.

The downgrades were a result of a review to S&P's bank ratings methodology, which arose when several of the agency's ratings on major international institutions were found to be inadequate in the aftermath of the 2008 global financial crisis.

Dozens of other banks around the world have already been downgraded under S&P's new criteria, and several more are likely to follow suit.

ASB Bank, a unit of Australia's biggest bank, Commonwealth Bank of Australia (CBA), said S&P had not specifically identified a change in the performance of CBA or ASB as part of its review and subsequent ratings change.

ASB said the downgrade would not affect its funding costs.

General manager, treasury, Nigel Annett said the ASB was well-capitalised with appropriate liquidity levels.

"We remain focused on increasing customer deposits and long-term wholesale debt, and reducing our use of offshore short-term borrowing," he said.

The bank also continued to benefit from the global strength of its parent company.

"At this point we do not expect the rating adjustment to have any material impact on our funding plans or expected pricing of new issuance.

"S&P has not specifically identified a change in the performance of CBA or ASB as part of its review and subsequent ratings change," Mr Annett said.

ANZ's chief financial officer in Australia, Peter Marriott, said the bank remained one of a select group globally that has an AA category rating under the criteria.

"We continue to be regarded as among the strongest banks globally and with a return to the rating we held until the beginning of 2007, we are one of the few banks in the world to have come out of the global financial crisis with the same rating as we went into it with."