The ratings of Australia's four major banks are well positioned to withstand macroeconomic headwinds over the next two years, including slowing GDP growth and geopolitical tensions, said Fitch Ratings in a Wednesday statement.

The four banks include Westpac Banking (ASX:WBC, NZE:WBC), ANZ Group (ASX:ANZ, NZE:ANZ), Commonwealth Bank of Australia (ASX:CBA), and National Australia Bank (ASX:NAB).

Fitch said that ANZ, NAB, and Westpac maintain Long-Term Issuer Default Ratings (IDRs) of 'AA-' and CBA was recently upgraded to 'AA' from 'AA-', reflecting its "superior" earnings metrics compared with peers. All four have Stable Outlooks.

Fitch expects a moderate improvement in earnings for the banks over the year and said that their margins should benefit from higher interest rates, although competition and cost inflation are likely to erode some of this benefit.

CBA's 'aa-' earnings and profitability score is the highest among the peer group, reflecting its significantly stronger operating profit/risk-weighted asset ratio, Fitch added.

Fitch expects higher interest rates, inflationary pressure on the cost of living, and a modest increase in unemployment for the year to drive a modest weakening in stage three loans in 2027, while collateral positions are strong across the peer group, supported by strengthened mortgage underwriting since the mid-2010s.

However, the ratings agency added that a prolonged conflict in the Middle East could heighten second-order effects on the domestic economy and result in weaker financial metrics for the major banks compared with the base case.