One Bank to sell – Westpac Banking Corp
Following an assessment of Australia’s Macro Profile, Moody’s (Moody’s Investors Service) has downgraded the long-term ratings for the major Australian banks (including Westpac Banking Corporation) by one notch to Aa3 from Aa2. It has revised the rating outlook for the major Australian banks to “stable” from “negative”. However, short term issuer credit ratings for the major Australian banks (including Westpac) were unchanged. Importantly, the change was driven by deteriorating credit conditions in Australia with elevated levels of debt and rapid credit expansion as they will lead to credit quality problems later. Notably, rising household debt in the situation of low nominal wage growth has led to very high levels of household leverage, thereby increasing the household sector’s and the banking sector’s sensitivity to some potential risks.
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