S&P upgrades Aussie major bank Tier 2 bond ratings from BBB+ to A-
This is a result of Coolabah's unique late 2023 forecast regarding Standard & Poor's lifting Australia's Banking Industry Country Risk Assessment (BICRA) score from 3 to 2 coming to fruition (lower is better), with the market-leading credit agency today declaring:
- Continued strengthening of regulatory and governance standards in the Australian banking sector has reduced industrywide risks. Simplified business models and advances in risk management have also contributed to this improvement.
- We now assess the institutional framework for the banking industry in Australia at the lowest risk level on our scale, and in line with that in Canada, Hong Kong, and Singapore.
- Consequently, we raised our long-term issuer credit ratings on most of the non-major Australia-based banks and other financial institutions. - We have also upgraded all the rated Additional Tier 1 and Tier 2 instruments issued by Australian banks and their New Zealand banking subsidiaries.
Coolabah published this forecast on 23 November 2023 here at Livewire, predicting that S&P was likely to move around the first quarter of 2024. No other analysts globally shared the same view on this rating change at the time, although many did subsequently come to slowly embrace the idea.
Other interesting consequences that we forecast were an upgrade to the major bank's AT1 hybrid ratings from BBB- to BBB, which has also materialised.
Aussie major bank Tier 2 is now in the "A" band for the first time with all three key global credit rating agencies (CBA will shortly be confirmed for an upgrade with Moody's, based on our research).
Australia's banking system also has the lowest BICRA score globally alongside Canada, Singapore and Hong Kong, which is an entirely prudent determination.
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