New Zealand banks face negative outlook-Moody's

WELLINGTON Aug 13 (Reuters) - The New Zealand banking system faces a negative outlook as the global recession takes its toll on the quality of assets held by the banks, rating agency Moody's said on Thursday.

Rising unemployment and soft commodity prices resulting in lower export returns would likely lead to stress on mortgages and delinquency rates, however the four Australian-owned banks which dominate the New Zealand banking system have a stable outlook, Moody's said.

"Impairment levels have risen noticeably so far in fiscal 2009 -- albeit off a low base -- thereby reducing net profit growth and internal capital generation capabilities," said Marina Ip, assistant vice president at Moody's Australia, in a statement.

"Despite the challenges it faces, the banking system remains sound, and the Reserve Bank of New Zealand has been proactive in reinforcing financial stability in the system," Ip said.

The comments knocked about 15 basis points off the New Zealand dollar NZD=, pushing it below $0.67.

New Zealand's banking system is dominated by the local subsidiaries of the four Australian banks, Australia and New Zealand Banking Group (ANZ.AX), Westpac Banking Group (WBC.AX) National Australia Bank (NAB.AX) and Commonwealth Bank of Australia (CBA.AX).

Analysts said the comments put New Zealand banks on a par with global peers.

"Moody's is not signalling or singling out NZ banking system as being in a worse shape than others," ANZ-National Bank senior economist Khoon Goh said.

In the last of the Reserve Bank's six monthly reports on the stability of the banking system, the central bank said the system remained sound, although the global financial crisis was continuing to have an impact. (Reporting by Adrian Bathgate)