IMB Ltd. Ratings Affirmed At #BBB/A-2#, Then Withdrawn At Issuer#s Request

Stocks and Financial Services Press Releases Tuesday June 19, 2018 18:16
SYDNEY--19 Jun--S&P Global Ratings

SYDNEY (S&P Global Ratings) June 19, 2018--S&P Global Ratings today said it has affirmed its 'BBB' long-term and 'A-2' short-term issuer credit ratings on Australia-based lender IMB Ltd. We then withdrew the ratings at the issuer's request. At the time of the withdrawal, the outlook on the long-term rating was negative.

The affirmation reflects our view of IMB's very strong capitalization, stable earnings, and low credit-loss experience. Offsetting these factors are the bank's high concentration in residential mortgages in the southern part of the Australian state of New South Wales, and small market share. Further, we believe the bank's market position puts it at a competitive disadvantage to Australia's major banks in sourcing funding under a stress scenario.

The negative outlook at the time of the withdrawal reflected a one-in-three chance that contrary to our base case, our risk-adjusted capital (RAC) ratio for IMB would fall below 15% on an ongoing basis. In our base case, we expect that IMB will maintain its RAC ratio just above 15%, which is a level we consider consistent with the rating we had assigned. We note that IMB maintains material flexibility around the size and timing of its buybacks and dividends and we expect a downside scenario to emerge if larger-than-expected share buybacks and dividends occurred. This is not withstanding our view that the alleviation of the buildup of economic risks in the Australian economy could lift IMB's RAC ratio in the next two years.

In addition, other factors that could weigh on the bank's credit profile, though less likely, include a material increase in credit losses relative to peers, aggressive growth outside of core areas, or a material change in its risk profile.

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