Australia's 'Big Four' banks face credit rate downgrade

Rodiano Bonacci
Giugno 19, 2017

Global ratings agency Moody's has downgraded the big four banks and eight other institutions over fears about the housing market.

Moody's said the long-term credit ratings for Australia and New Zealand Banking Group, Commonwealth Bank of Australia, National Australia Bank an Westpac Banking Corp were downgraded to Aa3 from Aa2.

The Australian government has taken steps in recent months to cool the red-hot property market amid concerns that speculation in housing could ultimately hurt consumers, banks and the economy. The ratings outlook for all four lenders is stable, Moody's said.

Moody's said while it did not expect a sharp downturn in housing as its key scenario, it could not ignore the risk that high levels of debt and the rapid credit expansion could pose down the track.

"Whilst mortgage affordability for most borrowers remains good at current interest rates, the reduction in the savings rate, the rise in household leverage and the rising prevalence of interest-only and investment loans are all indicators of rising risks".

Australia ... exhibits very high levels of household debt, with the ratio of household debt to disposable income rising to 188.7% at end-2016.

"This situation is particularly concerning, against the backdrop of low nominal income growth experienced in Australia over the past few years", it said.

The household sector's resilience to weaker employment levels and/or rising interest rates has materially reduced.

"The resilience of household balance sheets and, consequently, bank portfolios to a serious economic downturn has not been tested at these levels of private sector indebtedness", Moody's said in the statement.

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