S&P has lowered the credit rating of Kiwibank and its parent company, the state-owned enterprise NZ Post, by one level from AA- to A+ (outlook stable). Kiwibank’s short-term credit rating has also been lowered to A-1, while its standalone credit profile is unchanged at ’BBB’. The rating returns Kiwibank to one level below the large Australian banks. For the last eight months it had been at the same level.
S&P said the cut reflected NZ Post’s growing reliance on Kiwibank and falling revenues from its postal services. S&P credit analyst Adrian Chow described Kiwibank as a significant contingent liability for the group. "The downgrade reflects our view of the group's significant contingent exposure to its large and growing banking operations, Kiwibank, as well as our expectation that NZ Post's revenue and earnings will increasingly be focused on the group's more-competitive businesses such as parcels, express courier and financial services," Chow said.
NZ Post’s underlying net profit after tax increased 38% to $79.8 million in the year to June 30, with record earnings from Kiwibank offsetting a $17 million decline in the postal business. Kiwibank chief executive Paul Brock said “the downgrade is disappointing but Kiwibank remains among the highest rated banks in the world”. S&P flagged a possible downgrade for NZ Post earlier this year when it changed the company’s ratings outlook to negative.
Last December it downgraded all four of the big Australian-owned banks by one notch from AA to AA- (with stable outlooks) after a change in its ratings methodology.
