Moodys' Rating Review of Bank of New Zealand

Moody’s downgrade BNZ’s long term credit rating one notch from AA2 to AA3, with a stable outlook, and leave unchanged BNZ’s short term rating of P-1

BNZ Treasurer Tim Main says, “The one notch reduction in BNZ’s long term rating is understandable and expected, given the structural reliance of both Australian and NZ banks’ have on overseas wholesale funding, and given the changes to overseas capital markets since the global financial crisis (GFC).

The review outcome follows from a similar reduction in credit ratings for the Australian parents of all main bank peers in NZ.

“Access to offshore funding will be more challenging, and the cost of funding will increase, and this is a global trend that all banks have had to adjust to. The rating announcement however will not materially impact our access to wholesale funding given our continued very strong capacity to meet our financial commitments.

“The strong message here is that as a nation, New Zealanders need to save more, and be less reliant on overseas borrowing.

“BNZ’s balance sheet has remained strong and has strengthened since the GFC. The Bank remains extremely well positioned to meet the borrowing needs of our customers in a prudent and sustainable way. BNZ has grown its customer deposit funding and increased its market share, which has assisted in reducing reliance on more volatile short term money. It has also broadened and diversified its long term wholesale funding position by introducing a very successful covered bond programme, which has also allowed the bank to lengthen the duration of bonds issued, thereby reducing refinancing risk and concentration of funding maturities.

“BNZ’s long term rating still remains AA, and its short term rating is the highest Moodys can ascribe to a bank globally. BNZ enjoys a close relationship with its parent bank National Australia Bank, which has been assigned a AA2 long term rating.