PSIS latest to get S&P rating
Standard & Poor's has given PSIS a BB+ credit ratings and says the rating outlook is stable.
Friday, December 21st 2007, 4:12PM
"Offsetting these strengths are the company's small absolute capital base when compared to international peers, high cost structure, concentrated lending profile within the personal segment, declining profitability, and a mismatched asset-liability maturity profile which is moderately exposed to interest rate movements."
PSIS has a small but defendable and long-established business profile within the highly competitive New Zealand retail financial-services market. Although PSIS holds a small 0.6% of New Zealand financial institutions' assets, it is supported by a loyal client base. About 88% of its lending book as at fiscal-year ended March 2007 comprised residential mortgages, where three-quarters were in standard low-risk residential mortgages. The balance was in low-equity residential loans and personal loans, where approximately 4.9% were unsecured.
Over the last three fiscal years, PSIS' after-tax profits have been declining, mainly due to lower interest margins and higher costs, and despite growth in assets and the loan book.
The company has adequate liquidity and reasonable funding facilities for a normal market environment, although it has a mismatch in its asset-liability maturity profile, S&P says.
"The stable outlook reflects our expectation that the co-operative's financial characteristics will be maintained in the medium term. Unlike most financial entities in the non-bank finance industry, PSIS has very low credit risk within its lending book. We do not anticipate any material increase in credit risk in the short term," Evans says.
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