Australia’s banks enjoy most-favoured status

Australia’s leading banks are widely recognised as being among the world’s strongest. Their robust capital levels, solid profitability and domestic orientation are reflected in their ratings: of the 16 banks in the world that are still rated double-A or higher by Moody’s, a quarter are Australian. Nevertheless, vulnerabilities remain, with some analysts still expressing concern about the dependence of the big four Australian banks on international wholesale and short term funding. That reliance has been reduced significantly since the global financial crisis, with deposits having risen sharply, and loan to deposit ratios falling to much more manageable levels over the last three years. This, twinned with declining borrowing requirements and access to an expanded range of funding sources, continues to make Australian banks popular with domestic and international fixed income investors. To discuss the challenges and opportunities that lie ahead for Australian banks, leading issuers, intermediaries and investors gathered at the EuroWeek financial institutions roundtable in Sydney in July.