Standard & Poor’s (S&P) Downgrades Commonwealth Bank From Stable to Negative outlook

Commonwealth Bank has been downgraded by Standard & Poor’s (S&P)

Commonwealth Bank’s long-term senior unsecured rating has been affirmed at AA- by S&P, but moved from stable outlook to negative outlook. This is connected with S&P’s earlier announcement that Australia’s sovereign rating (both its local and foreign currency ratings) have been moved to negative outlook. S&P has made this subsequent announcement in relation to the Australian major banks to reflect their view of a potential reduction in Australia’s capacity to support systemically important banks.

Commonwealth Bank’s short-term rating of A-1+ has also been affirmed but moved to negative outlook.

S&P announced this in a report today entitled “Outlooks On Australian Major Banks And Strategically Important Subs Revised to Negative on Similar Sovereign Action”. S&P’s decision affects the four Australian major banks.
S&P has advised in respect of Australia’s sovereign rating that there is a one-in-three chance that the rating could be lowered within the next two years. Therefore, the Commonwealth Bank’s ratings may or may not be lowered. The Australian major banks’ ratings are dependent amongst other things on the Australian sovereign rating for local currency (rather than foreign currency), and may be positively influenced by factors which are bank-specific.

Certain rated subsidiaries of the Commonwealth Bank have also had their outlooks changed. This includes ASB Bank Limited’s long-term senior unsecured rating which has been affirmed at AA- by S&P but moved to negative outlook. Colonial Holding Company Limited’s counterparty credit rating has been affirmed at A+ but moved to negative outlook. The Colonial Mutual Life Assurance Society Limited’s counterparty credit rating has been affirmed at AA- but moved to negative outlook.