Fitch Ratings has revised the outlook on Westpac Banking's (ASX:WBC, NZE:WBC) New Zealand unit, Westpac New Zealand (WNZL), to positive from stable, while affirming its "A+" long-term ratings, according to a Thursday note from the credit ratings agency.
The positive outlook reflects expectations that WNZL's ratings could be upgraded after it is permitted to issue loss-absorbing capacity instruments to its parent, Westpac Banking, likely by late 2028.
Fitch highlighted WNZL's strong market position, sound risk management, and adequate capital and liquidity, while cautioning that weaker asset quality, higher funding costs, and intensifying competition could create pressure.
The bank's Common Equity Tier 1 ratio is expected to improve, while Fitch views WBC's New Zealand operations as strategically important, making parental support highly likely if required, Fitch said.