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  • Banking giant Westpac (WBC) has had its long-term ratings downgraded by Fitch Ratings, a leading financial analyst
  • Fitch downgraded all of the major Australian banks by one notch, taking them from AA- to A+
  • The reduction reflects the COVID-19 pandemic’s significant impacts on the Australian and New Zealand economies
  • Despite the downgrade, Fitch says Westpac is well capitalised to withstand the short-term consequences of the virus
  • Westpac’s share price was down 1.53 per cent, and trading for $16.10 at market close

Banking giant Westpac (WBC) has had its long-term ratings downgraded by Fitch Ratings, a leading financial analyst.

Fitch downgraded the long-term ratings not just for Westpac, but for all the major Australian banks. The decision came after Fitch’s assessment of the COVID-19 pandemic’s impact on economies. 

Fitch has downgraded Westpac’s long-term ratings by one notch, taking it from an AA- to an A+. Westpac’s short-term issuer credit rating also downgraded by one notch, from F1+ to F1. These new ratings also apply to Westpac New Zealand Limited. 

In light of the global economic situation, Fitch maintained that rating outlooks for all major Australia banks are still ‘negative’.

Fitch said the reduction reflected COVID-19’s significant economic impacts on Westpac’s core markets, Australia and New Zealand. The government’s restrictions to slow its spread also played a role.

Fitch predicted that Australia’s economy will contract by over 2 per cent this year, with unemployment averaging at 7.7 per cent. 

Despite the downgrade, Fitch believes Westpac is well capitalised to withstand the virus’ short-term consequences. However, the analyst predicts capital ratios are likely to feel pressure from asset quality deterioration and weakened profitability over the next two years.

Westpac’s funding and liquidity profile can remain resilient, however, with support from the central bank and other regulatory authorities. In fact, the Reserve Bank of Australia has recently deployed a number of tools to keep our financial system stable.

Westpac’s share price was down 1.53 per cent, and trading for $16.10 at market close.

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