"The rating upgrade reflects PSIS' strong membership support, which underpins a sound and reasonably resilient business profile as a retail-focused financial services provider in New Zealand that successfully withstood the recent difficult operating environment for financial services," said Standard & Poor's credit analyst Peter Sikora .
"We further believe that PSIS' credit profile is supported by the company's cooperative status, which forms the cornerstone of its customer focus and business success. Specifically, PSIS has maintained sound business growth through this period when new lending opportunities have been limited, without aggressively competing on price or relaxing its underwriting standards. More importantly, in our opinion the strong membership base has translated into a supportive and stable retail funding profile, and we expect this support to remain amid the ongoing difficult operating environment."
The ratings agency said it considered PSIS' commitment to maintaining a relatively lower-risk credit risk profile as helping to offset limitations regarding its moderate market position relative to larger nationally operating banks in New Zealand.
"The stable rating reflects an expectation that PSIS will maintain a low credit risk profile through a predominate focus on well secured residential mortgage lending," Sikora said.
The rating could come under downward pressure if Standard & Poor's were to observe an increase in the company's risk appetite through aggressive growth; a material weakening of underwriting standards or expansion into higher risk activities.
Standard & Poor's said it believed there was limited scope in the medium term for upward rating prospects and that the current ratings reflect PSIS' natural rating given its business focus and financial risk profile.
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