Moody's note that the recent mortgage.......>

RATINGS: Moody's note that the recent mortgage rate increases by some of

Australia's large banks "benefit ANZ, CBA and WBC, as it underlines the strong

pricing power of the banks, a key factor supporting their profitability. The

rate increases at the major banks follow similar announcements this year by

small and midsize Australian banks, and have been a response to higher wholesale

funding costs. The rate increases demonstrate that the major banks retain their

pricing power despite intense political scrutiny and the proceedings of

Australia's Royal Commission into Misconduct in the Banking, Superannuation and

Financial Services Industry. In addition, we do not expect the current round of

home loan rate hikes to result in a significant increase in loan delinquencies

or credit costs, despite very high household leverage in Australia. That is

because labour market conditions, which are a strong indicator of mortgage

performance, are likely to remain favourable, underpinned by solid economic

growth forecasts. Finally, collateral quality will also remain strong, despite

ongoing house price corrections in Sydney and Melbourne. The average

loan-to-value ratio for Australian bank home loan portfolios remains ~50%."