International ratings agency Fitch has given Australian banks a big tick, rating them “among the strongest in the world on a standalone basis”.

The 2013 financial year results of the big four Australian banks reflect their resilience, says Fitch Ratings.

“Asset quality performed well against our expectation of a modest deterioration,” the agency said in a statement on Friday.

“We continue to expect it to come under more pressure in 2014, although any weakening in asset quality is unlikely to erode the credit profiles of the big four banks.

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“Profitability continues to be a strong point.”

After this week’s release of Westpac’s full year results, the combined $38 billion operating profit of the big four banks was up around 10 per cent from 2012.

“Solid earnings coupled with surplus capital and conservative loan provisions provide a strong buffer against the risk of future losses,” Fitch said.   “Prudent cost-management was a key driver of profit.

“Cost-to-income ratios ranged around 40-45 per cent which compares favourably with international peers.”

Fitch said the most likely risk to asset quality is more likely to arise from commercial lending.

“This has traditionally been the primary source of loss for the Australian banks, despite the loan portfolios being weighted toward residential mortgages.

“This reflects the conservative nature of mortgage underwriting, but which may also face renewed challenges if a recent pick-up in property prices gathers significantly greater momentum.

“However, our base case view is that any asset-quality deterioration in FY14 will be manageable for the banks. This is because they maintain adequate capital and provisions against their business mix and risks.”

The Fitch statement said the four largest Australian banks – NAB, Commonwealth Bank, Westpac and ANZ – are rated ‘AA-‘, and are among the strongest in the world on a standalone basis.