MyState Bank Ltd. Ratings Lowered To #BBB-/A-3#, Then Withdrawn At Issuer#s Request

Stocks and Financial Services Press Releases Friday November 17, 2017 15:47
MELBOURNE--17 Nov--S&P Global Ratings

MELBOURNE (S&P Global Ratings) Nov. 17, 2017--S&P Global Ratings today said it has lowered its long-term issuer credit rating on Tasmania-based MyState Bank Ltd. (MSB) to 'BBB-' from 'BBB' and its short-term issuer credit rating to 'A-3' from 'A-2'. At the same time, we lowered our ratings on the senior components of MSB's A$2 billion debt instrument program to 'BBB-/A-3' from 'BBB/A-2' and also lowered our ratings on MSB's Tier 2 subordinated notes to 'BB' from 'BB+'. We then withdrew the ratings at the issuer's request. At the time of the withdrawal, the outlook on the ratings was stable, reflecting our expectations that the MyState group will maintain its risk-adjusted capital (RAC) ratio between 10% and 15%, while maintaining its sound underlying performance and good asset quality.

We lowered our ratings on MSB and its debt program and outstanding debt because we now believe that--contrary to our previous expectations--the group is likely to maintain its RAC ratio (based on S&P Global Ratings' Bank Capital Methodology) below 15%. We had foreshadowed a one-in-three chance of a downgrade in our previous negative outlook on the rating. MSB is the dominant operating entity within the MyState group; consequently, our ratings on the bank largely reflect the underlying credit quality of the group.

MyState group's RAC ratio as of June 30, 2017, was 12.6%, and we now expect it to remain broadly unchanged in the next two years. Our updated forecast of the group's RAC ratio takes into account the group's targeted regulatory total capital ratio of 12.75%-13.25%, which is broadly in line with its regulatory total capital ratio of 13.3% as of June 30, 2017.

In our opinion, all other factors driving MSB's credit profile remain largely unchanged since our previous review of the ratings on the bank. The ratings on MSB reflected the group's strong capitalization and its focus on low-risk residential mortgages. Offsetting these factors are MSB's limited franchise outside of its core service areas, and a funding profile that is vulnerable to competitive funding pressures, particularly in a stressed operating environment.

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