Australian Unity Bank Ltd.

Our stable outlook on AUB reflects our expectation that the mutual bank will remain a strategically important part of the broader AUL group, underlined by the group's supportive approach to AUB's growth. In addition, we expect the AUL group's credit profile to remain unchanged in the next two years. Alternative scenario: We see a one-in-three possibility that Australian banks will face reduced industry risks in the next two years. If that occurs, we expect to revise our assessment of AUB's SACP to 'bbb' from 'bbb-'. Nevertheless, we anticipate we will keep our long-term issuer credit rating on AUB unchanged at 'BBB+' in this scenario, reducing the uplift in our issuer credit rating on AUB above the bank's SACP to one

...Australian Unity Bank's (AUB) parent, the Australian Unity Ltd. (AUL) group, will provide extraordinary support to the bank in most circumstances, if needed. Consequently, we rate AUB two notches above its stand-alone credit profile (SACP). This reflects our view that AUB is an important part of the diversified AUL group. AUB's capitalization remains the lender's key stand-alone credit strength. As of June 30, 2022, our risk-adjusted capital (RAC) ratio for the mutual bank was 18.1%. AUB's capitalization is high and affords a buffer for the mutual bank to withstand a moderate weakening in the RAC ratio at the current rating level. We project the RAC ratio will strengthen to 19.5%-20.0% over the next 12-24 months. This reflects our expectation that ongoing capital injections will support the additional capital requirements that will ensue from significant credit growth and continued technology investments....

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