Australia's four largest banks' credit ratings were cut one level to Aa2 by Moody's Investors Service on concern their reliance on wholesale debt markets makes them vulnerable to swings in investor confidence.
Commonwealth Bank of Australia, Westpac Banking Corp, Australia & New Zealand Banking Group and National Australia Bank were
cut from Aa1 to Moody's third-highest grade, the New York-based ratings company said. The banks' shares fell while the cost of protecting against default on their debt was little changed.
The so-called four pillar banks have "relatively high levels of wholesale funding, at about 40 per cent of liabilities on average", Patrick Winsbury, a senior vice-president at Moody's in Sydney, wrote in an emailed statement. "The global financial crisis has underlined the speed with which shifts in investor confidence can impact bank funding."
Australia's biggest banks - four of the 14 lenders in the world with an AA rating or better from Standard & Poor's - largely remained profitable through the financial crisis.
Commonwealth Bank treasurer Lyn Cobley said: "We do not expect this to have any material impact on our funding plans or expected price of our new issuance."
National Australia remained committed to maintaining "strong capital, funding and liquidity positions", the Melbourne-based bank said.
Westpac was still "one of a small number of banks worldwide within the ratings agency's AA category", the Sydney-based bank said.
ANZ Bank said its rating was still one grade higher than it had before May 2007.
"The arguments for this downgrade have been in place for three, four or five years," said Wim Steemers, a banking analyst at Macquarie Funds Group in Sydney. "Is there a real risk that the Australian banks cannot fund themselves? Probably not."
- Bloomberg
