Weak demand for credit threatens big NZ banks

Photo / APN

Weak credit demand could curtail earnings growth for ANZ National, ASB, BNZ and Westpac New Zealand, credit rating agency Standard and Poor's said yesterday.

But S&P, in an "industry report card", said the local operations of Australia's big four banks may have some opportunity to improve their interest margins by continuing to convert fixed-rate borrowers to floating rates, and through more favourable repricing of fixed-rate loans.

"Furthermore, a relaxation of interest rates following the Christchurch earthquakes should eventually have a stimulatory effect, and in combination with high commodity prices, the temporary economic boost expected at the time of the Rugby World Cup and the eventual rebuilding of the earthquake-affected Canterbury region are factors that could support the standalone ratings of New Zealand's major banks," it said.

S&P said Asia-Pacific's big banks generally demonstrated resilience during the global financial crisis, with the sector performing satisfactorily.

"Overall, the sector has recovered satisfactorily, in our view," credit analyst Ryan Tsang said in the report.

"That said, the balance remains delicately poised for some of Asia-Pacific's major banks in terms of defending credit standings at the current rating levels," he said.

"Property-market sensitivities are a common theme that could negatively impact the major banks' credit quality, and inflation remains a key concern in some markets."

S&P said global debt markets remained skittish and that increased market volatility had the potential to negatively impact Asia-Pacific's leading banks.