DOWN­GRADE FOR 23 AUSSIE BANKS

S&P warns about risks of prop­erty mar­ket down­turn

New Straits Times - - Business | World -

SYD­NEY would be am­pli­fied by the Aus­tralian econ­omy’s ex­ter­nal weak­nesses, in par­tic­u­lar its per­sis­tent cur­rent ac­count deficits and high level of ex­ter­nal debt.”

S&P ex­empted the coun­try’s four largest mort­gage lenders — Aus­tralia & New Zealand Bank­ing Group Ltd, Com­mon­wealth Bank of Aus­tralia, West­pac Bank­ing Corp and Na­tional Aus­tralia Bank Ltd — on the as­sump­tion that the gov­ern­ment would step in to pro­vide sup­port if needed. It also opted not to lower the rat­ings for Mac­quarie Group Ltd and its bank­ing unit.

Other rat­ings com­pa­nies have voiced sim­i­lar con­cerns about risks stem­ming from Aus­tralia’s hous­ing mar­ket.

Moody’s In­vestor Ser­vices said this month the com­bi­na­tion of low wage growth and ris­ing house prices meant house­holds were be­com­ing more highly lever­aged, thereby “in­creas­ing the ma­jor banks’ sen­si­tiv­ity to ex­ter­nal shocks”. The rat­ings com­pany low­ered its out­look for the five largest banks to nega­tive in Au­gust last year.

Fitch Rat­ings ex­pects pres­sures in the hous­ing mar­ket to grow, but re­main man­age­able given the strength of the Aus­tralian bank­ing sys­tem. “It would take a sig­nif­i­cant rise in un­em­ploy­ment or in­ter­est rates to cause mean­ing­ful losses on mort­gage lend­ing,” said se­nior Fitch di­rec­tor Tim Roche.

Home prices here and in Mel­bourne have surged in the wake of un­prece­dented in­ter­est-rate cuts by the Re­serve Bank of Aus­tralia as the coun­try nav­i­gates its way through the af­ter­math of a min­ing boom. Reg­u­la­tors have pro­gres­sively tight­ened lend­ing re­stric­tions amid con­cerns about fi­nan­cial sta­bil­ity.

In March, the Aus­tralian Pru­den­tial Reg­u­la­tion Author­ity in­tro­duced new re­stric­tions on in­ter­est-only lend­ing and the Aus­tralian Se­cu­ri­ties & In­vest­ments Com­mis­sion said it was in­ves­ti­gat­ing lend­ing stan­dards in that sec­tor of the mort­gage mar­ket.

S&P last week main­tained Aus­tralia’s sov­er­eign rat­ing at “AAA” with a “nega­tive” out­look. The rat­ings firm warned then the na­tion’s prized top rank­ing would only be se­cure once there was “mean­ing­ful mod­er­a­tion” in hous­ing and credit growth. Bloomberg

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