Fitch Ratings upgraded Commonwealth Bank of Australia's (ASX:CBA) long-term issuer default rating to "AA" from "AA-", with a stable outlook, and its viability rating to "aa-" from "a+", reflecting the strength of its earnings profile, according to a Friday report by Fitch.
The ratings firm affirmed the bank's short-term issuer default rating at "F1+" and government support rating at "a."
The lender's long-term issuer default rating is notched up once from its viability rating to reflect the build-up of junior debt buffers to address loss-absorbing capacity requirements, per the report. The viability rating is underpinned by a strong business profile and solid financial profile.
The stable outlook reflects Fitch's view that the bank has some headroom in its financial metrics to maintain its current viability rating. Its operating profit/risk-weighted assets ratio is expected to outperform that of domestic major bank peers.
The decrease in the bank's stage three loan/gross loan ratio in the first half of fiscal year 2026 at 0.98% leads the ratings firm to expect a modest improvement for the fiscal year ending June, compared to the 1.05% posted in the prior fiscal year, as the benefit of interest-rate cuts from 2025 fully works through the portfolio. It then expects a mild weakening in metrics in fiscal year 2027 due to higher interest and unemployment rates.
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