Research Update: Australia's Westpac Banking Group 'AA-' Ratings Affirmed Despite Possible Westpac New Zealand Demerger; Outlook Negative

Australian major bank Westpac Banking Corp. (Westpac) is considering a demerger of its New Zealand banking subsidiary, Westpac New Zealand Ltd. (WNZL). In our view, WNZL is likely to remain a part of the Westpac group in the next two years. Even if Westpac proceeds with the demerger, we expect its creditworthiness to remain unchanged. In our view, WNZL remains highly likely to receive extraordinary financial support from Westpac. Nevertheless, we see increased downside risks to our ratings on WNZL due to the possibility of a reduced strategic importance of WNZL to the Westpac group. We are affirming our 'AA-/A-1+' long- and short-term issuer credit ratings on Westpac and its core subsidiaries, including WNZL. The outlook is negative, reflecting a

...- Australian major bank Westpac Banking Corp. (Westpac) is considering a demerger of its New Zealand banking subsidiary, Westpac New Zealand Ltd. (WNZL). - In our view, WNZL is likely to remain a part of the Westpac group in the next two years. Even if Westpac proceeds with the demerger, we expect its creditworthiness to remain unchanged. - In our view, WNZL remains highly likely to receive extraordinary financial support from Westpac. Nevertheless, we see increased downside risks to our ratings on WNZL due to the possibility of a reduced strategic importance of WNZL to the Westpac group. - We are affirming our '##-/A-1+' long- and short-term issuer credit ratings on Westpac and its core subsidiaries, including WNZL. - The outlook is negative, reflecting a one-in-three likelihood that we will lower our long- and short-term ratings on the bank in the next two years. The negative outlook on WNZL reflects the negative outlook on Westpac and the downside risk to WNZL's strategic importance...

Research Update