Turmoil costly for NAB

A LEADING credit ratings agency has downgraded its outlook on National Australia Bank following the series of scandals and turmoil at the top of the banking heavyweight.

New York-based Fitch Ratings has cut its outlook on NAB’s long-term credit rating from stable to negative.

Announcing the change, Fitch analysts said the downgrade was due to problems emerging from the banking royal commission during the past year.

Fitch currently has NAB pegged at AA-, which is a high investment-grade rating. That grade is three rungs below the best rating available, triple-A.

Australia’s other three big banks also have AA- ratings from Fitch, which is one of the world’s three big credit rating agencies alongside Moody’s and Standard and Poor’s.

If NAB were to have its credit rating downgraded, it would likely have to pay more for money it borrows from other institutions to lend out in Australia.

That means NAB could hike lending rates to cover its higher costs.

It comes after the Melbourne-based bank last month increased its variable home loan rates. NAB had resisted lifting its lending rates in August and September last year, when all the other big banks hiked their rates.

The downgrade at Fitch means it is more likely the ratings agency will cut NAB’s credit rating in future, but does not mean such a cut is certain.

Fitch downgraded its outlook on the Commonwealth Bank to negative last May – when the bank was embroiled in scandal – but has not adjusted the CBA’s credit rating since.