(Source: Info-Prod Research (Middle East))
August 17, 2008Moody's affirmed Commonwealth Bank of Australia's (CBA) Aa1 / Prime-1 deposit and debt ratings and its Bank Financial Strength Rating of B with a stable outlook, following theannouncement of its financial year 2008 results. "CBA's 2008 results confirmed our view that the bank's ratings arestrongly positioned, underpinning our stable outlook", said Patrick Winsbury, a Senior Analyst with Moody's Sydney office. Moody's ratings aim to take a through-the-cycle view, and although CBA's asset quality is weakening, it is off a strong base after many years of very favourable credit conditions. Furthermore, the bank's focus on residential mortgage lending should serve to limit ultimate credit losses: the average loan to value of the book is low at 40%, and higher LTV loans are mostly covered by locally incorporated mortgage insurers. Like its Australian bank peers, CBA does not engage in subprime style lending. CBA revealed no new, large corporate impaired assets in the half year to June 2008. CBA also has very limited mark to market risk or credit issues relating to structured products or credit default swap counterparties. The bank's Tier 1 capital ratio of 8.2% is solidly within expected ratingparameters, in particular when Australia's conservative capital ratio definitions are taken into consideration. Like all major Australian banks, CBA has a structural reliance on wholesale borrowings, but has proactively managed its liquidity/funding position throughout the crisis and maintained strong market access. The bank's leading deposit franchise in Australia is a significant credit strength. CBA's stable rating outlook is predicated upon: (i) economic conditions in Australia remaining relatively benign compared to other developed markets, including economic growth above 2% and only a moderate increase in unemployment, (ii) the bank achieving margin stabilization after a period of rising funding costs, and (iii) continued strong access to term funding in wholesale markets and solid liquidity statistics. The Commonwealth Bank of Australia is headquartered in Sydney, New SouthWales, Australia. It reported assets of AUD488 billion (approximately USD424 billion) at end June 2008.
Originally published by Info-Prod Strategic Business Information.
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