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CBS Canterbury ‘very happy’ with BB+ credit rating

South Island-based CBS Canterbury has been allocated a BB+/B counterparty credit rating with a stable outlook by agency Standard & Poor’s, giving it the opportunity to take up the government’s extension to the retail deposit guarantee scheme.

Thursday, November 19th 2009, 11:22PM

by Paul McBeth

South Island-based CBS Canterbury has been allocated a BB+/B counterparty credit rating with a stable outlook by agency Standard & Poor's, giving it the opportunity to take up the government's extension to the retail deposit guarantee scheme.

The rating agency said CBS should keep its "sound financial profile" intact through the economic downturn and that its non-performing assets and provision were "sound" by local and international standards.

"CBS has a sound regional franchise, organic growth opportunities in the Ashburton-Christchurch corridor when New Zealand's economy picks up, and a sound financial profile," said credit analyst Gavin Gunning in a statement.

CBS chief executive Bryan Inch said he was "very happy" with the rating, and that it is "best in class" for the non-bank deposit taking sector.

"You're not going to get better than that unless you've got a AA-rated parent," he said.

The rating opens the opportunity for CBS to take up the government's extended retail deposit guarantee. The building society is investigating the options, in particular being able to offer both guaranteed and non-guaranteed debt, though Inch said his preference would be to "run on our own feet" as the scheme created distortions in the industry.

The NBDT sector will have a better idea of how many companies will be able to enter the extended guarantee in March when they have to have their credit ratings in place, he said.

The S&P report said CBS has a small capital base by global standards, but that this was offset by a stable retail funding base and good liquidity.

The 134-year-old building society recorded a loss of $3.5 million in the 12 months ended March 2009 after it had to write down $4.1 million in goodwill.

Inch said he was surprised the competition for deposits had not abated since the Reserve Bank pushed out the deadline on its liquidity requirements for banks.

 

 

Paul is a staff writer for Good Returns based in Wellington.

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