BUSINESSDESK: Fitch Ratings has affirmed its AA- credit rating for New Zealand’s big four banks, saying they have performed well in a weak economy and will probably continue to produce strong results this year.
The rating agency retained its AA- long-term foreign and local currency issuer default ratings for ANZ National Bank, Westpac New Zealand, Bank of New Zealand and ASB Bank, with the four lenders also on a stable outlook.
The lenders qualified for an A viability rating due to their “consistently strong operating profitability, sound asset quality and strong capitalisation” and have taken steps to limit risks associated with their high reliance on tapping offshore wholesale funding lines.
“Against a weak economic backdrop, all four banks have performed well, generating strong operating profitability, improved net interest margins and operational efficiencies,” Fitch said.
“Fitch expects the banks to continue producing strong results in FY12, with earnings gains derived largely from further asset repricing, tight cost control and reduced loan impairment.”
Last year, Standard & Poor’s and Moody’s Investors Service changed their methodology for rating banks, which led to a downgrade of the Australasian lenders.
Fitch said it expects the banks’ Australian parents will likely provide support if needed.
The four banks’ asset quality was strong by international standards, though impairments by ANZ National and Westpac were more than those of ASB and BNZ in the 2011 financial year.
“The Christchurch earthquake has not significantly impacted the banks’ asset quality and ratios should gradually improve in 2012 in conjunction with Fitch’s expectation of a mild economic recovery,” it said.
The rating agency flagged the threat of a sovereign debt crisis in the Euro-zone as the biggest threat to the New Zealand banks, which “could trigger further market volatility and lower economic growth” if it deteriorates.