BUSINESSDESK: Heartland New Zealand, the lender formed from the merger of Pyne Gould's Marac Finance with the Canterbury and Southern Cross building societies, had its investment grade credit rating affirmed as it crosses its fingers to secure a banking license.
Rating agency Standard & Poor's kept a BBB- rating for Heartland Building Society with a stable outlook, citing its strengths as very strong capital and earnings assessment, good geographic and business diversity, and sticking to its timeline for its post-merger plan.
S&P sees Heartland's weaknesses as susceptible asset quality in commercial property, reliance on retail deposit funding and its relatively small size in the market.
The affirmation comes as Heartland waits for the Reserve Bank to decide on whether to approve its banking license, which is expected to be announced next month.
Heartland's shares rose 1.5% to 70 cents in trading today and have rallied 41% this year.
S&P held its stable outlook on the rating, saying it did not expect an upgrade in the short term, although one could be forthcoming if Heartland strengthens its position with a banking license and shows it can compete with New Zealand's major lenders on factors other than price or underwriting standards.
In August, Heartland chief executive Jeff Greenslade said the lender won't be chasing the low margin residential mortgage market and will focus on building its more valuable motor vehicle, rural and small- and medium-sized enterprise loan books.