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ANZ's latest ratings upgrade has positive repercussions for the Australian finance sector
By: Tim Roche
Director
Fitch Ratings
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During May, Fitch affirmed the long term Issuer Default Rating (IDR) of Australia and New Zealand Banking Group at ‘AA-', revising the outlook from stable to positive.
ANZ's improved earnings diversity following the full acquisition of its wealth management operations, the potential diversification benefits provided by the Asian expansion strategy, and its generally improved financial profile, all contributed to rating action.
The agency will monitor the execution of ANZ's Asian expansion over the next two years. Prudent execution of this strategy could enhance the long term IDR by improving ANZ's earnings and geographical diversity, with the potential for a modest positive impact on the group's funding profile.
However, expansion into developing markets also presents risks in the form of less robust legal, political and regulatory frameworks.
Fitch will monitor the impact of organic and acquired growth, and should the agency form the view that this expansion introduces a noticeably higher level of risk to the group, its ratings may not be upgraded.
