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- Table of Contents
- Overview
- Rating Action
- Rationale
- CreditWatch
- Related Criteria
- Ratings List
Overview
- Bank of Queensland Ltd. has entered an agreement to acquire Members Equity Bank Ltd.
- If the acquisition proceeds, we expect to equalize our ratings on ME Bank with those on the higher rated Bank of Queensland group.
- We are placing our long-term credit ratings on ME Bank on CreditWatch with positive implications.
Rating Action
On Feb. 22, 2021, S&P Global Ratings placed its long-term credit ratings on Australia-based Members Equity Bank Ltd. (ME Bank) on CreditWatch with positive implications. This follows Bank of Queensland Ltd.'s (BoQ; BBB+/Stable/A-2) announcement today that it is to acquire 100% of ME Bank for A$1.325 billion. Our 'A-2' short-term ratings on ME Bank are unaffected by the CreditWatch placement.
Rationale
We placed our long-term ratings on ME Bank on CreditWatch with positive implications to reflect our view that ME Bank is likely to become a core operating entity of the higher rated BoQ if the planned acquisition is completed as proposed. In that scenario, we would expect ME Bank to receive timely financial support from BoQ under all foreseeable situations. If the acquisition proceeds, we also expect to maintain our ratings on BoQ partly because the bank plans to fund the acquisition entirely by issuing common equity (see "Australia's Bank of Queensland To Tie The Knot With ME Bank," published Feb. 22, 2021).
CreditWatch
We expect to resolve the CreditWatch in the second half of calendar 2021 because we expect either of the following outcomes by then: The acquisition by BoQ is completed or a confirmation that the acquisition will not proceed. We will monitor any developments related to the transaction, including the receipt of regulatory approval.
We expect to raise our long-term ratings on ME Bank by one notch, equating them with the ratings on BoQ, if the transaction is completed as proposed.
We expect to affirm our ratings on ME Bank should the acquisition by BoQ not proceed.
Related Criteria
- General Criteria: Group Rating Methodology, July 1, 2019
- General Criteria: Hybrid Capital: Methodology And Assumptions, July 1, 2019
- Criteria | Financial Institutions | General: Risk-Adjusted Capital Framework Methodology, July 20, 2017
- General Criteria: Methodology For Linking Long-Term And Short-Term Ratings, April 7, 2017
- Criteria | Financial Institutions | Banks: Quantitative Metrics For Rating Banks Globally: Methodology And Assumptions, July 17, 2013
- Criteria | Financial Institutions | Banks: Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011
- Criteria | Financial Institutions | Banks: Banks: Rating Methodology And Assumptions, Nov. 9, 2011
- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
Ratings List
| Ratings Affirmed; CreditWatch/Outlook Action | ||
|---|---|---|
| To | From | |
Members Equity Bank Ltd. | ||
| Issuer Credit Rating | BBB/Watch Pos/A-2 | BBB/Stable/A-2 |
| Senior Unsecured | BBB/Watch Pos | BBB |
| Subordinated | BB+/Watch Pos | BB+ |
| Subordinated | BBB-/Watch Pos | BBB- |
S&P Global Ratings Australia Pty Ltd holds Australian financial services license number 337565 under the Corporations Act 2001. S&P Global Ratings' credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act).
Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.
| Primary Credit Analyst: | Lisa Barrett, Melbourne+ 61 3 9631 2081; lisa.barrett@spglobal.com |
| Secondary Contact: | Riley Michel, Melbourne+ (61) 3-9631-2108; riley.michel@spglobal.com |
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As a seasoned financial analyst with a deep understanding of credit rating methodologies and the banking industry, I can confidently provide insights into the recent developments involving Bank of Queensland Ltd. (BoQ) and Members Equity Bank Ltd. (ME Bank), as outlined in the provided article.
Firstly, the announcement on February 22, 2021, by S&P Global Ratings to place the long-term credit ratings on ME Bank on CreditWatch with positive implications is a significant move. This action was triggered by BoQ's announcement of its intention to acquire 100% of ME Bank for A$1.325 billion. Such credit rating adjustments are crucial in the financial landscape and reflect the potential impact of the acquisition on ME Bank's creditworthiness.
The rationale behind placing ME Bank's long-term ratings on CreditWatch with positive implications is grounded in the expectation that ME Bank is likely to become a core operating entity of the higher-rated BoQ if the acquisition proceeds as planned. This suggests a positive view regarding ME Bank's integration into the BoQ group, anticipating timely financial support under various circ*mstances. The article mentions that the acquisition is expected to be funded entirely by issuing common equity, a strategic move that likely influenced the credit rating assessment.
S&P Global Ratings outlines the timeline for resolving the CreditWatch, indicating that it is expected to be concluded in the second half of calendar year 2021. The resolution will depend on the completion of the acquisition by BoQ or confirmation that the acquisition will not proceed. The monitoring of regulatory approval processes is highlighted as a crucial factor in this regard.
Furthermore, the article provides details about potential rating actions based on different outcomes. If the acquisition is completed as proposed, S&P Global Ratings expects to raise ME Bank's long-term ratings by one notch, aligning them with the ratings on BoQ. On the other hand, if the acquisition does not proceed, the ratings on ME Bank are expected to be affirmed.
The inclusion of related criteria at the end of the article is noteworthy. It references various criteria such as "Group Rating Methodology," "Hybrid Capital: Methodology And Assumptions," and "Methodology For Linking Long-Term And Short-Term Ratings." These criteria provide the analytical framework and standards that S&P Global Ratings employs in assessing creditworthiness, ensuring transparency and consistency in their evaluations.
In summary, the article offers a comprehensive overview of the credit rating actions, the rationale behind them, the timeline for resolution, and the potential impact of the acquisition on the credit profiles of both BoQ and ME Bank. The inclusion of related criteria underscores the analytical rigor and methodology employed by S&P Global Ratings in evaluating financial institutions.
