SYDNEY (S&P Global Ratings) Aug. 25, 2021--S&P Global Ratings today said it has assigned its 'A-' issue rating to ANZ Bank New Zealand Ltd.'s (ANZ NZ) proposed NZ$250 million unsecured subordinated notes issue (new Tier 2 notes).
ANZ NZ is the first bank planning to issue Tier 2 notes under the Reserve Bank of New Zealand's (RBNZ) revised capital standards. The proposed notes are unusual by international comparison, as they do not have a mandatory contingent capital clause leading to common-equity conversion or a principal write-down. Nevertheless, like other typical Tier 2 capital instruments, in liquidation the notes will rank below senior debt issued by ANZ NZ.
As such, we rate the new Tier 2 notes one notch below the 'a' stand-alone credit profile (SACP) of Australia and New Zealand Banking Group Ltd. (ANZ), reflecting contractual subordination. We do not deduct any further notches because the notes do not have a mandatory contingent capital clause leading to common-equity conversion or a principal write-down, or coupon deferral features. We note that under the legislation, the RBNZ may bail in the Tier 2 without triggering a default on the senior debt. Nevertheless, we consider that this legislative power does not create an equivalent of a mandatory contingent capital clause leading to common-equity conversion or a principal write-down.
In comparison with ANZ NZ's proposed Tier 2 notes, we rate Basel III compliant Tier 2 debt instruments issued by the New Zealand major banks (including ANZ NZ) two notches below their group SACP--the additional notch in those instruments reflects the mandatory contingent capital clause leading to common-equity conversion or a principal write-down.
The starting point for our ratings on ANZ NZ's new Tier 2 notes is the ANZ group SACP because we believe that: i) these instruments may absorb losses without triggering a default on the senior debt; ii) the ANZ group will support all of ANZ NZ's obligations--including subordinated debt and hybrid issues--as if they were ANZ's own obligations; and, iii) the Australian government is unlikely to extend any financial support to these instruments, if needed.
Related Criteria
- General Criteria: Hybrid Capital: Methodology And Assumptions, July 1, 2019
- General Criteria: Group Rating Methodology, July 1, 2019
- Criteria | Financial Institutions | General: Risk-Adjusted Capital Framework Methodology, July 20, 2017
- General Criteria: Methodology For Linking Long-Term And Short-Term Ratings, April 7, 2017
- General Criteria: Guarantee Criteria, Oct. 21, 2016
- Criteria | Financial Institutions | Banks: Assessing Bank Branch Creditworthiness, Oct. 14, 2013
- Criteria | Financial Institutions | Banks: Quantitative Metrics For Rating Banks Globally: Methodology And Assumptions, July 17, 2013
- Criteria | Financial Institutions | Banks: Banks: Rating Methodology And Assumptions, Nov. 9, 2011
- Criteria | Financial Institutions | Banks: Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011
- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
- Criteria | Financial Institutions | Banks: Commercial Paper I: Banks, March 23, 2004
Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.
| Primary Credit Analyst: | Nico N DeLange, Sydney + 61 2 9255 9887; nico.delange@spglobal.com |
| Secondary Contact: | Sharad Jain, Melbourne + 61 3 9631 2077; sharad.jain@spglobal.com |
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