Moody’s Investors Services has downgraded the credit rating of Australia’s “Big Four” banks, citing “elevated risks” in the household sector.
The quartet were the highest-profile casualties in a broad move that cut the ratings of 12 Australian lenders and their affiliates. ANZ Banking Group, Commonwealth Bank, National Australia Bank and Westpac saw their ratings cut by one notch to Aa3 from Aa2.
At these new ratings, Moody’s considers the outlook to be “stable”.
In Moody’s view, elevated risks within the household sector heighten the sensitivity of Australian banks’ credit profiles to an adverse shock, notwithstanding improvements in their capital and liquidity in recent years.
While Moody’s does not anticipate a sharp housing downturn as a core scenario, the tail risk represented by increased household sector indebtedness becomes a material consideration in the context of the very high ratings assigned to Australian banks.
Shares in Australia’s major banks all closed higher by more than 0.9 per cent on Monday, prior to the release of the statement.
Last month, rival agency Standard & Poor’s downgraded ratings for 23 Australian financial institutions, citing “increased risk of a sharp correction in property prices”, but left the Big Four untouched because it believes they are likely to receive “timely financial support” from the government should the property market crash.
Earlier this year, Fitch lowered its outlook on the Australian banking sector to “negative”, but left ratings unchanged.