Revolut bank rated ‘BBB+’ by S&P Global

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Revolut Payments NZ chief executive Ryan Brosnahan says the NZ banking market is primed for disruption. Photo / Supplied

New digital bank Revolut Payments New Zealand has received a ‘BBB+’ long-term issuer credit rating from S&P Global Ratings.

The Reserve Bank of NZ (RBNZ) on Tuesday said Revolut’s NZ operation had achieved registration as a bank. The process began in December 2024.

S&P said its ratings on Revolut Payments
NZ (RPNZ) benefited from Revolut’s unconditional guarantee of all the issuer’s debt obligations.

Both entities share an ultimate parent, Revolut Group Holdings. RPNZ, which also styles itself as Revolut Bank NZ, is NZ’s first digital bank.

It brings with it credit card plans and what it says is a much-needed fillip for rivalry in a market dominated by traditional players.

S&P Global said: “We view RPNZ’s credit profile as weaker than the New Zealand major banks, noting the startup nature of RPNZ’s business activities in New Zealand.”

The ‘BBB+’ long-term issuer credit rating was accompanied by a positive outlook.

Rationale

“The positive outlook reflects that on the guarantor, which is due to the group’s intention to build up an additional loss-absorption capacity [ALAC] buffer over the next two years.”

S&P Global said in a note that it had equalised its rating and outlook on RPNZ with those on Revolut, reflecting the guarantor’s unconditional and irrevocable guarantee of RPNZ’s obligations.

“In our assessment, Revolut would have strong visibility of any impending liquidity issues at RPNZ and would be prepared to facilitate timely payment, if required, under the guarantee.”

Rapid Growth

S&P Global said that RPNZ’s business in NZ would likely grow rapidly, as it is off a small base. The company had seen strong growth in a number of global markets.

“We expect RPNZ will target local transaction accounts and credit cards from larger bank peers,” the ratings firm said.

“Despite likely rapid growth, we expect RPNZ to remain a small lender in the overall New Zealand market.”

S&P Global added that as the RPNZ business grows in NZ, it was expected to continue benefiting from Revolut’s technology, treasury capabilities, and other shared group services.

“Further group support is demonstrated by the capital contribution made by the group to support RPNZ meeting regulatory capital expectations to support rapid growth.”

RPNZ plans to shortly and formally rename itself as Revolut Bank NZ. It has already used that name in media statements.

The bank’s chief executive, Ryan Brosnahan, said the NZ banking market was “primed for disruption”.

He said RPNZ’s arrival was a “structural wake-up call for the industry” and it would inject “much-needed competition” into the NZ banking market.

Change of ratings

The positive outlook on RPNZ reflected S&P Global’s expectation that it would likely raise its ratings “if we viewed the creditworthiness of the guarantor, Revolut, to have improved”.

It said it could raise Revolut’s rating if it increased its ALAC buffer in the next two years.

“We would likely lower our rating on RPNZ by multiple categories if the guarantee on its debt were to expire and not be replaced,” S&P Global said.

“We could raise the rating on RPNZ if we raise the rating on Revolut.

“This could occur over the next 12-24 months once Revolut Group Holdings starts issuing bail-in debt and we are certain the group’s ALAC buffer will exceed our adjusted 4% threshold of S&P Global Ratings’ risk-weighted assets.”

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