Moody's says impaired loans have peaked, upgrades NZ bank outlook

Wednesday 27th January 2010

Ratings agency Moody’s Investors Service predicts New Zealand’s non-performing loans have peaked and has boosted its outlook on the country’s banking sector to stable as the economy dragged itself out of its worst recession in 18 years.

The rating agency has improved its outlook for 12 nations across Asia as the region’s economic prospects pick up amid a stabilising global economy, while access to credit has improved since the global financial crisis in 2008. While Moody’s sees New Zealand’s impaired loans as having peaked, it said it will “closely monitor these levels in coming months as some exposures may become delinquent over time.”

“Borrower concentrations still exist, particularly in the property sector, where development has slowed and final completion or settlement has been delayed due to factors such as a fall in market value,” the report said.

Overleveraging in the property sector helped contribute to the collapse of the finance sector over the past three years, which has left thousands of investors hundreds of millions of dollars out of pocket.

Still, Moody’s said it’s comfortable with New Zealand’s improved economic forecasts, and was encouraged by the central bank’s announcement in December that it has brought forward the timing of when it will start to remove monetary stimulus to the middle of this year, rather than the second half.

Reserve Bank Governor Alan Bollard is expected to keep the official cash rate on hold at a record low 2.5% when he reviews interest rates tomorrow.

Businesswire.co.nz

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