New York, July 17 (FinanceEnquiry.com) – Analysts at Moody’s Investors Service has downgraded the senior unsecured debt rating of Bank of Queensland Limited from A3 to Baa1. The subordinated debt has been downgraded from Baa1 to Baa2 and preference stock from Ba1 to Ba2. The outlook on all the ratings has been stable.
In a research note published today, the analysts mention that the lowering of BoQ’s ratings indicates the potential for current pressure on asset quality due to the relatively weak condition of the economy in south east Queensland.
The new ratings also includes the structural earnings challenges faced by BoQ which was common with other regional banks of Australia. The loan quality of BoQ has deteriorated markedly over FY2011 and some further weakening has been evident over the first half of 2012.
However, substantial provision is needed mainly for a small number of large commercial real estate exposures which cause bank to report a loss for the latter period. Moody’s expects that provisioning would remain above pre-Global Financial Crisis levels in context of the stresses facing the Queensland economy, the analysts say.
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