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Highlights
- BOQ gets a stable outlook from Fitch ratings.
- The rating agency has issued ratings based on its newly issued Bank rating criteria.
Bank of Queensland Limited (ASX:BOQ) has got an 'A-' rating from Fitch Ratings for its Long-Term Issuer Default Rating (IDR). The rating agency has, conferred a 'Stable Outlook' for BOQ. The rating is in line with Fitch's updated Bank Rating Criteria. According to the new criteria, BOQ has bagged a 'bb’-without a Government Support rating.
What is behind Fitch’s BOQ default rating?
- Fitch Ratings expects the Australian banking operations to remain stable for the upcoming two years. It seems Australia's GDP will grow by 3.7% in 2021 and 4.5% in the next year, 2022.
- Fitch also predicts the implementation of tighter macro-prudential measures based on strong housing price growth and weak lending standards.
- However, based on BOQ's competitive advantages and sound risk management policies, Fitch has assigned an 'A- 'rating to BOQ's IDRs (Issuer Default Ratings) and senior debt.
- It foresees a meek deterioration in BOQ's asset quality in 2022 due to arrears from COVID-19 hardships and a possible rise in BOQ's stage 3 loan ratio.
- Fitch sees cost synergies from the ME Bank acquisition and assesses BOQ's business profile to remain consistent with its current factor score of 'bbb+' till 2022.
What is IDR- Issuer Default Rating
As per Fitch Rating's newly issued Bank rating criteria, a bank's Issuer default rating (IDR) is driven by its viability score, which considers factors like operating environment, business and risk profile, asset quality, earnings, leverage and funding availability. While the 'AAA' rating is considered the best, 'D' is the worst. Rating is further segregated into long term IDR and short-term IDR.
However, on ASX, BOQ shares are trading in green at AU$7.990 per share as of 2:03 PM AEDT.
Bottom line
Fitch ratings have conferred ratings to most Australian banks based on their recently issued rating criteria on 12 November 2021. However, the rating for BOQ and a stable outlook seems to have not lifted investor confidence on BOQ shares.
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