February 7, 2017 / 2:50 AM / 7 months ago

Fitch Assigns First-Time Rating to ING Bank (Australia) Limited

(The following statement was released by the rating agency) SYDNEY, February 06 (Fitch) Fitch Ratings has assigned ING Bank (Australia) Limited (INGBA) an Issuer Default Rating (IDR) of 'A'. The Outlook is Stable. At the same time, the agency has assigned INGBA a Viability Rating (VR) of 'a-'. A full list of rating actions is at the end of this commentary. KEY RATING DRIVERS IDRs, SENIOT DEBT AND SUPPORT RATING INGBA's Long-Term IDR and senior debt ratings are linked to those of its ultimate parent, ING Bank N.V. (ING, A+/Stable). The Support Rating of '1' reflects the extremely high probability of institutional support from the parent should it be required. In Fitch's view, INGBA has a strategically important role within the group. As of 31 December 2015, INGBA accounted for only 4% of ING's total assets, indicating that the parent would have a strong ability to provide support. VIABILITY RATING INGBA's risk appetite is a key driver of its Viability Rating, especially given the bank's growth aspirations. INGBA's loan book is skewed towards residential mortgages and the bank adopts a conservative risk appetite, broadly consistent with its domestic peers. INGBA's management quality and risk framework benefit from being part of the ING Group. The agency believes the bank's appetite for risk and its risk controls will be the key determinant of other factors such as asset quality, profitability and capitalisation through a cycle. INGBA's capitalisation, as measured on both risk- and un-risk weighted ratios, is a rating strength relative to domestic peers and should remain so through the next 12-18 months, even though Fitch expects the bank's capitalisation ratios to fall as a result of the bank's growth plans. INGBA says that it has a flexible dividend policy, which should allow the bank to retain capital for growth if needed. INGBA's asset-quality ratios are broadly better than those of its domestic peers, although Fitch believes the bank's growth aspirations could bring its asset-quality measures back towards those of its peers, particularly if loan growth is concentrated in non-mortgage exposures. INGBA has modest market share, similar to other Australian regional bank peers, and the bank appears to have limited franchise uplift from being part of the ING Group as ING had almost no operations in Australia outside of INGBA. INGBA has no branch network, instead distributing products through its online, call-centre and third-party channels, meaning its net interest margins lag peers' but its overall profitability remain comparable due to the bank's sector-leading cost efficiency and similar funding profile, which is primarily deposit-focused. RATING SENSITIVITIES IDRs, SENIOR DEBT AND SUPPORT RATING INGBA's IDRs and Support Rating are sensitive to changes in the ability or propensity of ING to provide support. A change in ING's ratings would likely trigger similar action on INGBA. The ratings may also be downgraded if Fitch no longer considered INGBA to be a strategically important subsidiary of ING. VIABILITY RATING A significant weakening in underwriting standards or risk controls would likely leave INGBA's asset quality, profitability and capitalisation more susceptible to deterioration in a weaker operating environment and could result in a downgrade of the VR. An upgrade of the VR appears unlikely in the short to medium term as it would require a significantly stronger franchise, representing greater pricing power, without a material weakening of risk appetite. Fitch has assigned the following ratings: ING Bank (Australia) Limited: - Long-Term Issuer Default Rating of 'A'; Outlook Stable - Short-Term Issuer Default Rating of 'F1' - Support Rating of '1' - Viability Rating of 'a-' Contact: Primary Analyst Tim Roche Senior Director +61 2 8256 0310 Fitch Australia Pty Ltd Level 15, 77 King Street, Sydney NSW 2000 Secondary Analyst Jack Do Associate Director +61 2 8256 0355 Committee Chairperson Jonathan Lee Senior Director +886 2 8175 7601 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1018650 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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