Fitch Places Kiwibank on Positive Outlook, Affirms All Ratings

Thu Jul 10, 2014 8:04pm EDT

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(The following statement was released by the rating agency) SYDNEY, July 10 (Fitch) Fitch Ratings has affirmed Kiwibank Limited's (Kiwibank) Foreign and Local Currency Long-term Issuer Default Ratings (IDRs) at 'AA' and 'AA+' respectively. The Outlooks have been revised to Positive. A full list of rating actions is provided at the end of this commentary. Today's rating action has no impact on the ratings of Kiwibank's covered bonds. KEY RATING DRIVERS AND SENSITIVITIES - IDRS, SENIOR DEBT AND SUPPORT RATINGS The revision of the Outlooks on Kiwibank's Long-term IDRs to Positive from Stable reflects the Outlook change of New Zealand to Positive from Stable (see separate Rating Action Commentary published on 8 July 2014). Kiwibank's IDRs, senior debt and support ratings reflect Fitch's view that it is a core subsidiary of New Zealand Post (NZ Post), which, in turn, is a wholly-owned state enterprise of the New Zealand sovereign (rated AA/Outlook Positive). The agency believes support would likely flow from the sovereign through NZ Post to Kiwibank, should NZ Post find it difficult to provide support itself. In addition, NZ Post provides an explicit, unlimited guarantee for the bank's unsecured debt (including customer deposits), except where a payment obligation is expressly excluded from the guarantee; i.e. subordinated debt. Kiwibank's debt accounts for almost all NZ Post's debt, with most of this debt representing retail deposits. KEY RATING DRIVERS - Viability Rating (VR) Kiwibank's VR reflects the bank's improved and more conservative risk appetite, as well as its sound asset quality which compares favourably with domestic peers. The VR also considers the bank's more sustainable operating profitability, improving retail franchise, and its good funding position. Nevertheless, capitalisation has remained more moderate relative to peers, despite the continuing improvements. For more details, please see separate Rating Action Commentary dated 6 May 2014. RATING SENSITIVITIES - VR An increase in the bank's risk appetite, significant weakening in asset quality, and/or a deterioration in capitalisation may place downward pressure on Kiwibank's VR. Further positive VR momentum appears unlikely in the short-to medium-term. The rating actions are as follows: Kiwibank Limited Foreign Currency Long-Term IDR affirmed at 'AA'; revised Outlook to Positive from Stable Foreign Currency Short-Term IDR affirmed at 'F1+' Local Currency Long-Term IDR affirmed at 'AA+'; revised Outlook to Positive from Stable Local Currency Short-Term IDR affirmed at 'F1+' Viability Rating affirmed at 'bbb' Support Rating affirmed at '1' Foreign currency senior unsecured rating affirmed at 'AA' Local currency senior unsecured rating affirmed at 'AA+' Commercial paper Programme affirmed at 'F1+' Contact: Primary Analyst Andrea Jaehne Director +61 2 8256 0343 Fitch Australia Pty. Ltd., Level 15, 77 King Street, Sydney NSW 2000 Secondary Analyst Tim Roche Senior Director +61 2 8256 0310 Committee Chairperson Mark Young Managing Director +65 6796 7229 Media Relations: Leni Vu, Sydney, Tel: +61 2 8256 0326, Email: Leni.Vu@fitchratings.com. Additional information is available on www.fitchratings.com Applicable criteria, Global Financial Institutions Rating Criteria, dated 31 January 2014, Rating FI Subsidiary and Holding Companies dated 10 August 2012, and Assessing and Rating Bank Subordinated and Hybrid Securities, dated 31 January 2014 are available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Rating FI Subsidiaries and Holding Companies here Assessing and Rating Bank Subordinated and Hybrid Securities Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S FREE WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Fitch Australia Pty Ltd holds an Australian financial services licence (AFS licence no. 337123) which authorises it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.

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