Moody's Investors Service has today upgraded the long-term unsecured issuer ratings of BOQ Specialist Bank Limited (BOQ Specialist) to A3 from Ba1 and short-term ratings to P-2 from Not Prime. BOQ Specialist was formerly known as Investec Bank (Australia) Limited (IBAL). The rating action follows its acquisition by Bank of Queensland (BOQ, A3 stable, C-/baa1 stable) on 31 July 2014.
This concludes the review of IBAL's ratings (as BOQ Specialist was known before 31 July 2014), commenced on 2 December 2013. There is no impact on the ratings of BOQ, which were affirmed when this transaction was originally announced on 11 April 2014.
As part of the transaction, BOQ acquired the Professional Finance and Asset Finance businesses of the former IBAL. Moody's understands that other existing lines of business were transferred to other entities within the wider Investec group prior to the completion of the transaction. IBAL is now 100% owned by BOQ and has been renamed BOQ Specialist.
"BOQ Specialist's ratings are aligned with BOQ's ratings", says Ilya Serov, a Senior Credit Officer at Moody's Sydney office. "This is based on the substantial progress BOQ has already made in integrating BOQ Specialist. It is also based on the very high level of support its provides to BOQ Specialist".
Moody's expects that over time BOQ Specialist will become fully integrated within BOQ's business banking operations. The rating agency also expects that following the completion of the integration process and the merging of BOQ's and BOQ Specialist's banking licenses, BOQ Specialist's ratings would be withdrawn.
Moody's also notes that, before this transaction, the long-term issuer rating of IBAL incorporated the benefit of parental support from Investec Bank plc (Baa3 stable, D+/baa3 stable). Following deal completion, any rating linkages to Investec Bank plc have been removed from BOQ Specialist's ratings. BOQ Specialist's rating now addresses the characteristics of the two businesses comprising BOQ Specialist, and its linkages with Bank of Queensland.
The last rating action was on 14 April 2014, when the deposit and debt ratings of IBAL were placed under review for possible upgrade.
On 14 April 2014, Moody's affirmed BOQ's long-term rating at A3 with a stable outlook, following the announcement of the planned acquisition of IBAL's Professional Finance and Asset Finance businesses. Moody's views the acquisition to have a limited impact on BOQ's current credit risk profile and balance sheet strength. BOQ's capital ratios remain strong, The acquisition significantly increases the footprint of BOQ's existing commercial loan portfolio and provides it with greater industry and geographic diversity.