S&P, Moodys downgrade Kiwibank’s rating

Once 100% owned by NZ Post, as of late last year Kiwibank is now owned by NZ Post, ACC and the NZ Super Fund.

Today’s move from the credit agencies was prompted by the expiry of an unconditional guarantee on Kiwibank’s payment options from its majority owner, NZ Post.

S&P has lowered the long-term issuer credit rating on Kiwibank to 'A' from 'A+' and affirmed the short-term issuer credit rating at 'A-1'.

Its long-term issuer credit rating on Kiwibank now incorporates three notches of uplift above the bank's stand-alone credit profile.

S&P credit analyst Andrew Mayes said this is because Kiwibank is highly likely to receive extraordinary support from the New Zealand government, if needed.

“This is because we consider that Kiwibank plays an important role to the New Zealand government and that the bank has a very strong link to the government as a result of its indirect ownership by the government.”

Mayes said the stable outlook on Kiwibank reflects their expectation that the bank will retain its focus on relatively lower-risk residential lending while maintaining its risk-adjusted capital ratio above 10%.

“It also reflects our expectation that the bank's current market position and funding profile will remain largely unchanged over the next two years.”

Moody's downgraded Kiwibank’s long-term issuer and deposit ratings to A1 from Aa3, but said the rating outlook is stable.

In a statement, the agency said the rating downgrade is a direct result of the removal of the NZ Post guarantee which they believe has introduced some uncertainty about the potential for parental support.

However, it said it believes that Kiwibank will continue to benefit from a very high likelihood of government support, given that it will remain indirectly owned by the government.

“Kiwibank's position as the key domestic player in the New Zealand banking system and its position as a government-owned bank also support Moody's view that there is a very high probability that it will receive government support -- via its government-owned shareholders -- in case of need.”