MYSTATE LIMITED
Fitch Ratings has downgraded the senior unsecured ratings assigned to
All other ratings assigned to MYS and its bank subsidiary,
Fitch had previously used an incorrect approach for assigning ratings to MYS's programme. The agency aligned MYS's senior unsecured debt ratings with the bank holding company's (BHC) Issuer Default Ratings (IDRs), the approach used for operating banks in jurisdictions without developed resolution regimes such as
However, Fitch's Bank Rating Criteria states that the principles for markets with developed resolution regimes should be used in assigning senior unsecured debt ratings for BHCs such as MYS in all cases. The programme ratings have now been assessed correctly at a notch lower by applying the developed resolution regime approach, resulting in the downgrade.
Key Rating Drivers
The senior unsecured ratings assigned to MYS's AUD2 billion debt programme are one notch below the IDRs of the group. This is in line with Fitch's standard approach for BHC senior unsecured debt ratings where there is not full depositor preference (
MYS has not issued senior unsecured debt and in practice we expect this to be left to its operating bank subsidiary, MSB. Group junior debt buffers consist only of AUD50 million of Tier 2 debt, which equates to less than 2% of risk-weighted assets at
The short-term rating assigned to the programme is at the lower of the two options available at a long-term rating of 'BBB', as MYS's funding and liquidity score of 'bbb' is not high enough to support the higher option.
Rating Sensitivities
Factors that could, individually or collectively, lead to negative rating action/downgrade:
The long-term senior unsecured rating assigned to MYS's debt programme would be downgraded if MYS's Long-Term IDR were downgraded and BHC senior unsecured plus group junior debt buffers remained below 10% of group risk-weighted assets.
The short-term senior unsecured rating assigned to MYS's debt programme would only be downgraded if the long-term senior unsecured debt programme rating were downgraded to 'BB+' or below.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
The senior unsecured ratings assigned to MYS's debt programme would be upgraded if MYS's Long-Term IDR were upgraded. They may also be upgraded if BHC senior unsecured plus group junior debt buffers increased to above 10% of group risk-weighted assets, although this appears unlikely in the short to medium term.
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Sources of Information
The principal sources of information used in the analysis are described in the Applicable Criteria.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of environmental, social and governance (ESG) credit relevance is a score of '3'. ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
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