“(Updates with banks’ comment from fifth paragraph.)
May 18 (Bloomberg) — 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 Ltd., and National Australia Bank Ltd. were cut from Aa1 to Moody’s third-highest grade, the New York-based ratings company said. The banks’ shares and the Australian dollar 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 percent of liabilities on average,” Patrick Winsbury, a senior vice president at Moody’s in Sydney, wrote in an e-mailed 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 a AA rating or better from Standard & Poor’s — largely remained profitable through the financial crisis as the economy avoided recession and the government introduced guarantees to support debt sales. Moody’s move brings its rating on the lenders in line with S&P’s assessment.
Commonwealth Bank Treasurer Lyn Cobley said in a statement that “we do not expect this to have any material impact on our funding plans or expected price of our new issuance.” National Australia remains committed to maintaining “strong capital, funding and liquidity positions,” the Melbourne-based bank said in an e-mailed statement.