ASB New Zealand’s strongest bank, by a whisker

ASB New Zealand’s strongest bank, by a whisker

By Pattrick Smellie

May 27 (BusinessDesk) – The international credit rating agency Moody’s Investors Services says New Zealand’s financially strongest bank is the ASB.

The ANZ/National Bank has heavy rural sector exposure, Westpac’s New Zealand operation is over-exposed to commercial property, and Bank of New Zealand has lent to too many of the same people, Moody’s says in a credit rating downgrade announcement made today.

All four of New Zealand’s major trading banks dropped from Aa2 credit ratings to Aa3, mirroring a similar drop from Aa1 to Aa2 dished out to the banks’ Australian parents.

ASB is owned by Commonwealth Bank of Australia and BNZ by the National Australia Bank.

“ANZ/National maintains a concentration in rural lending, whilst Westpac has a concentration to commercial property, “ Moody’s says. “Both sectors are experiencing stress.”

BNZ’s asset mix was diversified, but “the bank does have relatively high single name borrower concentrations due to its higher proportion of corporate/institution lending”.

ASB had fewer non-performing loans compared to its New Zealand peers and a higher proportion of customer deposits compared to the other New Zealand banks, leaving it less reliant on wholesale funding, said Moody’s.

“New Zealand major banks are structurally sensitive to wholesale funding market conditions,” said Moody’s. “The major banks have around 40% of their total funding base sourced from wholesale funding, with around two-thirds of this being sourced offshore.”

Slower loan growth and higher customer deposit growth over the last six months had eased some funding pressures.

BNZ’s successful European-issued covered bonds have kept their Aaa rating.

“The issuance of covered bonds will diversify the banks' wholesale funding and further lengthen the bank's average funding maturity,” Moody’s said..

(BusinessDesk)

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