Moody's commented that Westpac BankingCorporation's market update held no implications for its Aa1 / Prime-1deposit and debt ratings and its Bank Financial Strength Rating of B. Allthe ratings carry a stable outlook. "Westpac's guidance on asset quality and financial performance werewithin expectations and Moody's maintains its stable outlook on thebank's ratings", said Patrick Winsbury, a Senior Analyst with Moody'sSydney office. Moody's ratings aim to take a through-the-cycle view, and althoughWestpac's asset quality is weakening, it is off a strong base after manyyears of very favourable credit conditions. The market update revealed no new, large corporate impaired assets sincethe bank's 1H08 reporting date at end March. Westpac also has verylimited mark to market risk or credit issues relating to structuredproducts or credit default swap counterparties. However, as a large SMEsector lender, its future performance is likely to closely track that ofthe Australian economy. The bank's pro forma Tier 1 capital ratio of 7.7% is also comfortablywithin expected rating parameters. Moody's notes that capital ratiodefinitions are conservative in Australia relative to other jurisdictions. Like all major Australian banks, Westpac has a structural reliance onwholesale borrowings, but has proactively managed its liquidity/fundingposition throughout the crisis and maintained strong market access. Thebank's retail deposit growth was a below market as price competition hasintensified recently, but is being addressed. Westpac's stable rating outlook is predicated upon: (i) economicconditions in Australia remaining relatively benign compared to otherWestern markets, including economic growth above 2% and only a moderateincrease in unemployment, (ii) the bank achieving margin stabilizationafter a period of rising funding costs, and (iii) continued strong accessto term funding in wholesale markets and solid liquidity statistics. There is no change to Moody's view that the potential merger withSt.George Bank would be ratings- neutral for Westpac. Westpac Banking Corporation is headquartered in Sydney, New South Wales,Australia. It reported assets of AUD402 billion (approximately USD366billion) at end March 2008.
Originally published by Info-Prod Strategic Business Information.
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