A warning from Moody's it may downgrade Australia's top four banks may have come late as concerns over access to funding has diminished with worries now shifting to a slow recovery in credit demand, analysts say.
Moody's placed Australia's top banks on review for possible downgrade on Wednesday due to their reliance on overseas wholesale funding markets, which have been prone to sudden shifts in recent years.
"Fixed income investors are well aware of the issues that prompted Moody's move. I don't think the debt market will respond much," Royal Bank of Scotland's John Bunoccorsi said.
Sharemarkets also shrugged off the Moody's warning and top banks - ANZ, Commonwealth Bank, National Australia Bank and Westpac were little changed in Australian trade.
Even a downgrade would likely have a minimal impact as it would only bring Moody's ratings in line with rival Standard & Poor's and the securities are already benchmarked to S&P's rating, analysts said.
Analysts added that Australian banks have begun to slowly address their deposit deficiency in funding and the sharp slowdown of lending growth to around 3 per cent a year for the past two years from an average 10 per cent is also fixing the problem.
"We have increased customer deposits and long-term wholesale debt. Additionally, we have increased the weighted average tenor significantly increased our holdings of liquid assets," CBA's group treasurer Lyn Cobley said in response to Moody's.
"We believe this places us in a strong position from a funding perspective for the future," Cobley said in a statement, echoed by the other lenders as well.
The banks, which borrow more than $100 billion or a quarter of their annual funding needs, have said in their market updates that concerns over access to funds had passed and costs had dipped in the past few months.
They also warned that lending growth would be slow to return as cashed up corporates still preferred paying down debt to borrowing.
The banks have also taken advantage of the rising savings rate and are now feverishly raising deposits after the global financial crisis shut debt markets and forced them to use government guarantees for funding.
Deposits as a proportion of total annual funding has risen to over 60 per cent now compared with around half before the global crisis. Banks are also borrowing longer tenor debt that their average tenor is now 3.5 years compared to 2-2.5 earlier.
Reuters