Ratings agency S&P Global has been busy looking over the Australian banking sector this week and has given its verdict.
S&P is positive on the banking sector and has raised its outlooks to stable from negative on the long-term issuer credit ratings on the four major banks and Macquarie Group Ltd (ASX: MQG).
It commented: “We believe that the Australian banking system’s funding profile has improved in the past 10 years on the back of growing customer deposits and falling offshore borrowings.”
The ratings agency notes that its issuer credit ratings are two notches above the bank’s standalone credit profiles. This reflects its view that, if needed, the systemically important banks are likely to receive timely financial support from the Australian government.
How does S&P Global rate the banks?
This morning Australia and New Zealand Banking GrpLtd (ASX: ANZ), National Australia Bank Ltd (ASX: NAB), and Westpac Banking Corp (ASX: WBC) all confirmed that S&P has revised the outlook for their long-term issuer credit ratings to stable from negative.
The ratings agency also affirmed their long-term issuer credit ratings at AA- and A-1+ for the short term.
However, it is worth noting that the rating outlook for both Westpac New Zealand Limited and for Westpac Life-NZ Ltd was unchanged at negative. This reflects the potential for reduced support as Westpac is considering alternative ownership structures.
Australia given thumbs up
Today’s action follows news that S&P has revised its overall outlook on its long-term ratings on Australia to stable from negative.
S&P explained: “The government’s swift and decisive fiscal and health response to contain the pandemic and limit long-term economic scarring has seen the economy recover quicker and stronger than we previously expected.”
“The stable outlook reflects our expectations that the general government fiscal deficits will narrow in line with our forecasts. We expect the budget to be supported by steady revenue growth, aided by robust commodity prices and expenditure restraint. We believe Australia’s external accounts are likely to remain stronger than in the past and be resilient during potential crises,” it concluded.