Moody's revises outlook on Australia banks down to negative

MELBOURNE: Moody's Investors Service has downwardly revised its outlook on Australia's banks to negative, warning that their profit growth could slow due to weak wage growth, low interest rates, strong lending competition and rising household debt.

The ratings agency also warned of rising problem loans in the resources sector, resource-related industries and households in mining-dependent states in its decision to revise the outlook from stable.

"The outlook change reflects Moody's expectation of a more challenging operating environment for banks in Australia for the remainder of 2016 and beyond, and which could lead to a deterioration in their profit growth and asset quality as well as an increase in their sensitivity to external shocks," Frank Mirenzi, a vice president and senior analyst at Moody's, said in a statement.

Australia and New Zealand Banking Group acknowledged the change in outlook on Friday, but noted that Moody's had reaffirmed ANZ's 'Aa2' rating.