Fitch Ratings has revised the outlook on the Long-Term Issuer Default Rating (IDR) for all four of Australia’s major banks to Stable, from Negative, and has affirmed the rating for each of the four banks (NAB, Commonwealth, ANZ and Westpac) at A+.

In early April 2020, a month or so into the Covid pandemic, Fitch broke ranks from the credit ratings agency pack and sliced the AA- credit ratings of the four major banks to A+. Fitch adopted a Negative outlook of the IDR at the same time.

In broadly similar language for each bank, Fitch yesterday said the Outlook revision “reflects Australia's improved economic prospects, with the financial profiles [of the banks] now likely to remain consistent with its current ratings over the next two years.

“Australia's successful handling of the health aspects of the coronavirus pandemic has allowed the economy to rebound strongly; and we now expect GDP to expand by 4.7 per cent in 2021,” Fitch said.

“Downside risks remain to this forecast, particularly until the vaccination programme is completed, but have declined significantly since early 2020.

For all four banks, Fitch emphasised that the Short-Term Issuer Default Rating of F1 “is at the lower of the two options available at a Long-Term IDR of A+, as the funding and liquidity score is not sufficiently high enough to support the higher option.”

This is consistent with the cut in the short term ratings for all four major banks this time last year.

In its ratings commentary on Westpac yesterday, Fitch noted that “Westpac's profitability metrics [are] no longer being consistent with a factor score of a+”, one of the inputs to its assessment of the Stable outlook for Westpac.