Moody’s cuts its outlook for Australia’s banking system to negative from stable

Moody’s Investors Services downgraded its outlook for the Australian banking sector from stable to negative, citing the "broad and growing scope of economic and market disruption from the coronavirus outbreak".

Key findings

"While Australian banks' current asset quality is very strong, it will deteriorate significantly if disruptions persist for a prolonged period and push up the unemployment rate, which will lead to more impairments of residential mortgages, which comprise approximately two thirds of banking system loans.”

"We view the current economic support packages, including fiscal stimulus, enhanced financial market liquidity and term funding to support credit intermediation, as measures that are temporarily increasing the level of indirect government support for the banking.”

In contrast, S&P Global said that the major Aussie banks not at risk of downgrade amid pandemic