Wellington, July 21 NZPA - A second credit ratings agency has said that potential tax payments worth hundreds of millions of dollars would be unlikely to pressure New Zealand banks' ratings.

Last week, BNZ lost a court case over structured finance transactions in which $654 million of tax and interest is disputed, but it said it was likely to appeal. Penalties could also result.

Other banks facing court action are ANZ, with $562m in dispute; Commonwealth Bank of Australia, which owns ASB, with $280m in dispute; and Westpac, with $903m in dispute, according to a report by UBS analysts.

Moody's said today that paying the disputed tax assessments, dating to the late 1990's and early 2000's, should have minimal impact on the four banks' credit ratings, or on their Australian parent's ratings.

"We do not expect these tax assessments alone to impact the ratings of the New Zealand banks, because the potential tax assessments and penalties, while material, are not expected to exceed 60 percent of a year's pre-tax earnings in the worst case," said Moody's Sydney-based assistant vice-president Marina Ip.

BNZ's pre-tax profit for the six months to March 31 was $669m, with impairment losses of $99m.

"And whilst earnings growth will likely be impacted, the banks will remain profitable entities," she said.

The banks had not disclosed the amount of provisioning to be set aside for the tax assessment cases, which might not be for the full liability.

Any appeals would take some years to work through the courts, Ms Ip said.

In Westpac's case, while it faced the largest potential liability, the transactions were done while it was a branch of Westpac Banking Corp so the Australian parent would be responsible.

On Friday, Standard and Poor's affirmed the ratings of ANZ, BNZ, ASB and Westpac, and said that repaying disputed tax would not pressure their ratings.