Australian Unity Bank Ltd.

Our stable rating 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. We forecast the mutual bank's credit losses will remain low, at about 5 basis points (bps) of customer loans, lower than the systemwide average. We also expect AUB to remain very well capitalized, with a RAC ratio between 17.0%-17.5% over the next two years. We are unlikely to lower our rating on AUB in the next two years. However, we could do so if: The credit profile of the broader

...Australian Unity Bank's (AUB) parent, the Australian Unity Ltd. (AUL) group, will provide extraordinary support to the mutual bank in most circumstances, if needed. This reflects our view that AUB is an important part of the diversified AUL group. Consequently, we rate the mutual bank one notch above our assessment of its stand-alone credit profile (SACP). AUB's capitalization remains its key stand-alone credit strength. We forecast the mutual lender's risk-adjusted capital (RAC) ratio will decrease to 17.0%-17.5% over the next two years driven by above-system loan growth. Further capital injections from AUL will support AUB's RAC ratio, which was 17.4% as of Dec. 31, 2023. AUB's small scale constrains its business stability. The mutual bank has a market share of about 0.05% of the banking system as of March 31, 2024. Like all mutual banks, AUB remains a price taker in Australia's lending and deposit markets. We view AUB as vulnerable to competitive pressures in the country's highly commoditized...

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