OREANDA-NEWS. S&P Global Ratings said today that it had revised its outlook on ING Bank (Australia) Ltd. (IBAL) to positive from stable. At the same time, we affirmed our 'A-/A-2' ratings on the bank.

"In our view, IBAL's strategy to broaden its product suite and increase the number of products per customer has started to gain traction, albeit off a low base," said S&P Global Ratings credit analyst Michael Puli. "Ongoing success in this strategy could materially increase the number and proportion of customers that consider the bank their main financial institution."

Further, the bank's strategy may increase its market share and strengthen its long-term business franchise.

The ratings on IBAL reflect its very strong capitalization and very good credit loss experience, benefiting from a focus on residential mortgages across Australia. Offsetting these factors is the bank's small balance sheet relative to the Australian major banks, which we believe would be at a competitive advantage in sourcing domestic funds under a stress scenario.

We assess the bank as a highly strategic subsidiary of the wider ING Bank N. V group (A/Stable/A-1) and, therefore, view it as likely to source financial support from the wider group in a stress scenario. The bank currently receives no additional uplift from this potential group support, given its stand-alone creditworthiness matches our view of the financial strength that the group would support under a stress scenario.

"The positive outlook reflects a one-in-three chance that we will raise the long-term issuer credit rating on IBAL to 'A', driven by its strengthening business franchise and market position," said Mr. Puli.

We expect no material change to other aspects of IBAL's credit profile including: sustained good asset quality and a risk-adjusted capital (RAC) ratio well above 15%. We expect the bank will remain a highly strategic subsidiary of the ING Bank N. V group. The bank's contribution to the wider group is likely to remain small, although we expect it to remain a leader in group product and service developments.

We see a one-in-three chance that we will raise the rating on IBAL over the later end of the next two years. We expect this scenario to emerge if the bank is successful in achieving its targets of increasing the proportion of customers that consider it their main financial institution, strong balance sheet growth, maintaining good operating performance, and deepening its relationship with customers via a broader product suite and other initiatives, and consequently we form an opinion that the bank's business position has significantly strengthened.

It is highly unlikely that we will assess IBAL as a core subsidiary of the wider banking group, as we expect that the bank's contribution to group earnings and group operations would remain relatively small.

We expect to revise the outlook to stable if in our opinion the bank were unable to demonstrate that its strategy is strengthening its business franchise. We expect to lower the issuer credit rating on IBAL if both the bank's and the group's creditworthiness weakened--a scenario we consider highly unlikely in the next two years.