(The following statement was released by the rating agency) Fitch Ratings-Sydney-September 10: Fitch Ratings has affirmed Suncorp-Metway Limited's (SML) Long-Term Issuer Default Rating (IDR) at 'A+'. The Outlook is Stable. Suncorp-Metway Limited; Long Term Issuer Default Rating; Affirmed; A+; RO:Sta ; Short Term Issuer Default Rating; Affirmed; F1 ; Viability Rating; Affirmed; a- ; Support Rating; Affirmed; 1 ----senior unsecured; Long Term Rating; Affirmed; A+ ----senior unsecured; Short Term Rating; Affirmed; F1 Key Rating Drivers IDRS, SUPPORT RATING AND SENIOR DEBTSML's IDRs and senior debt ratings are aligned with those of its ultimate parent, Suncorp Group Limited (SGL; A+/Stable). This reflects our view of an extremely high probability of institutional support, if required, which underpins the Support Rating. We believe SGL has a strong willingness to provide support, reflecting the huge reputational risk and franchise damage a default of SML would have on the group. The core nature of the banking operation, high integration and support record also underpin this view.A common regulator across SGL's regulated subsidiaries, including SML, makes capital and liquidity relatively fungible within the group and means flows are likely to be facilitated if required. SML is a large part of SGL, equating to 69% of group assets and 31% of group equity at end-June 2019 (FY19). However, the group maintains a large balance of surplus capital, which could be used to provide meaningful support to SML if needed.SML's Short-Term IDR of 'F1' is at the lower of the two options available at the 'A+' cross over point, as it is aligned with the Short-Term IDR of SGL.VIABILITY RATING SML's Viability Rating is underpinned by its risk-management framework, which has benefited from group-wide investment by SGL. The improvements made by the bank help to offset a limited franchise and underpin asset quality. We expect asset quality to be less volatile through a cycle relative to pre-global financial crisis levels due to a lower-risk lending profile.Nevertheless, the operating environment remains challenging and some deterioration in asset quality metrics are likely in FY20. Deterioration will be from a strong position and should be manageable under our base case, with low interest rates and stable unemployment providing some support. A substantial weakening is not envisaged without a large economic shock, such as may occur if Australia's largest trading partner, China, were to experience a sharp economic slowdown.Profitability may also be pressured in FY20. We expect cost control to be a focus; however, this may be difficult in light of continued investment in systems, regulatory compliance costs and higher impairment expenses, which are likely to rise from current low levels.Fitch expects SML's Fitch Core Capital ratio and common equity Tier 1 (CET1) ratio to remain steady at around 10.3% and 9.3% respectively into 2020 absent of new regulatory capital requirements and given the bank's common equity Tier 1 ratio target of 8.75% to 9.25% in the short-term. Fitch believes SML can also access surplus capital within other entities in the Suncorp group if needed and estimates that group surplus capital held outside of SML equated to about 120bp of SML's risk-weighted assets at FYE19.SML's high reliance on wholesale funding compared with many domestic peers is unlikely to change significantly over the medium-term and remains a weakness for the Viability Rating. Liquidity is managed well, which provides some offset to the risks associated with this funding structure. RATING SENSITIVITIES IDRS, SUPPORT RATING AND SENIOR DEBTSML's IDRs, Support Rating and senior debt ratings are sensitive to changes in the ability or propensity of SGL to provide timely support, if needed. This may result from a change SGL's IDR or a weakening of the importance of SML to the group's strategy. VIABILITY RATING SML's Viability Rating is sensitive to any weakening in risk appetite, such as a loosening of underwriting standards or risk controls in the pursuit of growth. Such weakening could result in a larger-than-peer deterioration in asset quality, profitability and capitalisation should there be a significant downturn in the operating environment. Positive rating action on the Viability Rating is not probable, as it would require a substantial improvement in SML's franchise. Public Ratings with Credit Linkage to other ratings SML's ratings are support driven by its parent's ratings. ESG Considerations Unless otherwise disclosed in this section, the highest level of 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 our ESG Relevance Scores, visit www.fitchratings.com/esg Contacts: Primary Rating Analyst Tim Roche, Senior Director +61 2 8256 0310 Fitch Australia Pty Ltd Level 15 77 King Street Sydney NSW 2000 Secondary Rating Analyst Jack Do, Director +61 2 8256 0355 Committee Chairperson Heakyu Chang, Senior Director +822 3278 8363
Media Relations: Leslie Tan, Singapore, Tel: +65 6796 7234, Email: leslie.tan@thefitchgroup.com; Peter Hoflich, Singapore, Tel: +65 6796 7229, Email: peter.hoflich@thefitchgroup.com. Additional information is available on www.fitchratings.com Applicable Criteria Bank Rating Criteria (pub. 12 Oct 2018) https://www.fitchratings.com/site/re/10044408 Short-Term Ratings Criteria (pub. 02 May 2019) https://www.fitchratings.com/site/re/10073011 Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/site/dodd-frank-disclosure/10088074 Solicitation Status https://www.fitchratings.com/site/pr/10088074#solicitation Endorsement Policy https://www.fitchratings.com/regulatory ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. 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