RTTNews - Tuesday, Moody's Investors' Service said in a report that its industry outlook for banking systems in Australia and New Zealand is negative, reflecting the impact of the slowdowns in global and domestic economies. But, both systems remain robust. By contrast, ratings outlooks vary, between stable and negative, the report said.
Moody's said the Australian financial system remained one of the world's most robust, having largely escaped crisis-related losses, but credit costs were mounting and loan volumes were contracting as the economic weakness persists.
Losses from the banks' retail exposures, which typically comprise over half of total loans, are not likely to create the same degree of stress as in other developed markets; rather it is business / corporate sector performance that will likely remain the swing factor for Australian bank asset quality, Moody's said
The corporate exposures were skewed towards larger companies, with single-name concentrations being relatively high, creating some sensitivity to event risk, the firm said.
Meanwhile, the banking system in New Zealand remained sound and regulatory developments continued to support financial system stability. However, the country faced a weakening local economy that was relatively small and narrow, making it vulnerable to external shocks.
The country's corporate asset quality remains strong as companies have de-geared in recent years. However, material stress is appearing in the country's large dairy sector as a result of lower milk prices and high leverage present in some recent farm conversions and corporatisations, Moody's said.
Further, looking at the prospects for Asia's banks as a whole, Moody's said it sees challenges, in light of the severe and protracted nature of the current global recession.
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