MELBOURNE (S&P Global Ratings) May 22, 2023--The orderly fall in property prices over the past 18 months has reduced the risk of a significant rise in credit losses for New Zealand banks.
That's according to S&P Global Ratings' report, titled "Banking Industry Country Risk Assessment: New Zealand," published today.
We have revised the economic risk trend for banks in New Zealand to stable from negative. The revised assessment remains consistent with our ratings and outlooks on banks and finance companies in New Zealand.
High interest rates should continue to support the orderly unwinding in property prices in New Zealand. Credit losses over the next two years should revert to their long-term historical average of about 10 basis points despite likely interest rate rises and house price falls.
"We consider the risk appetite settings of New Zealand's banks to be conservative," said S&P Global Ratings credit analyst Lisa Barrett. "The banking sector earnings are likely to remain adequate to absorb credit losses. However, the banking system's high share of net external borrowings remains a risk if a dislocation in international funding markets occurs."
| Banking Industry Country Risk Assessment--New Zealand | ||||||
|---|---|---|---|---|---|---|
| To | From | |||||
| BICRA Group | 4 | 4 | ||||
| Economic risk | 4 | 4 | ||||
| Trend | Stable | Negative | ||||
| Economic resilience | Very low risk | Very low risk | ||||
| Economic imbalances | High risk | High risk | ||||
| Credit risk in the economy | Intermediate risk | Intermediate risk | ||||
| Industry risk | 4 | 4 | ||||
| Trend | Stable | Stable | ||||
| Institutional framework | Intermediate risk | Intermediate risk | ||||
| Competitive dynamics | Low risk | Low risk | ||||
| Systemwide funding | High risk | High risk | ||||
| Government support | Support uncertain | Support uncertain | ||||
| Note: Our BICRA groups are ranked on a scale of 1-10 with 1 denoting the lowest risk and 10 the highest risk. | ||||||
Note: Our BICRA groups are ranked on a scale of 1-10 with 1 denoting the lowest risk and 10 the highest risk.
This report does not constitute a rating action.
AUSTRALIA
S&P Global Ratings Australia Pty Ltd holds Australian financial services license number 337565 under the Corporations Act 2001. S&P Global Ratings' credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act).
The reports are available to subscribers of RatingsDirect at www.capitaliq.com. If you are not a RatingsDirect subscriber, you may purchase copies of these reports by calling (1) 212-438-7280 or sending an e-mail to research_request@spglobal.com. Ratings information can also be found on S&P Global Ratings' public website by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request copies of these reports by contacting the media representative provided.
| Primary Credit Analyst: | Lisa Barrett, Melbourne + 61 3 9631 2081; lisa.barrett@spglobal.com |
| Secondary Contacts: | Sharad Jain, Melbourne + 61 3 9631 2077; sharad.jain@spglobal.com |
| Nico N DeLange, Sydney + 61 2 9255 9887; nico.delange@spglobal.com | |
| Media Contact: | Richard J Noonan, Melbourne + 61 3 9631 2152; richard.noonan@spglobal.com |
No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.