The long-term credit rating for Australia’s fifth-largest bank by Australian assets, Macquarie Bank, was upgraded by one notch by S&P Global Ratings. Prior to this ratings upgrade in mid-December 2019, Macquarie Bank’s credit rating from S&P had been unchanged for 28 years.
Given its size and importance to the Australian financial system, Macquarie Bank is perhaps the “fifth major bank” in Australia and as such benefits from a 2 notch uplift to its stand-alone credit rating from S&P. The four major banks (ANZ, CBA, NAB, Westpac) all benefit from a 3 notch uplift to their stand-alone credit ratings for implied government support; whereas large regional banks such as BEN and BoQ (the sixth and seventh largest ADIs in Australia by assets) are given no credit from S&P for any potential support they may receive in a crisis from the Australian federal government and the RBA.
Over recent years, Macquarie Group has made significant progress in diversifying its business profile and reducing its reliance on business lines sensitive to financial market conditions. This has resulted in an enhanced ability to absorb any earnings shocks arising from market volatility. According to S&P’s assessment of Macquarie in December 2019, “the Macquarie group and bank’s risk management capabilities have strengthened over time in the context of a wide and complex range of credit and noncredit risk exposures across various businesses and geographies…The group’s recent streamlining of its operating activities has resulted in some moderation of its complexity, which in our view supports management’s ability to oversee and manage associated risks across different business lines.”
S&P’s ratings outlook on Macquarie Bank is “stable” reflecting the ratings agency’s expectation that “the bank will maintain solid operating performance, strong capital levels, low credit losses, and good risk management outcomes in the next two years”. Macquarie Bank’s A+ rating from S&P is one notch higher compared with the A2 and A ratings assigned by Moody’s and Fitch, respectively.