SBS Bank and HBS merger plan favours HBS - Fitch

Fitch Ratings said the advantages of a proposed merger of SBS Bank, the former Southland Building Society, and Hawke's Bay-based HBS Building Society are more obvious for HBS. Fitch today affirmed the ratings of both after they said yesterday they have signed a heads of agreement to pursue a merger supported by both boards. If the merger is approved, the targeted effective date is October 1. Fitch expects the merger to deliver a larger and more diversified financial institution and said the two are a good cultural fit.

Fitch Ratings said the advantages of a proposed merger of SBS Bank, the former Southland Building Society, and Hawke's Bay-based HBS Building Society are more obvious for HBS.

Fitch today affirmed the ratings of both after they said yesterday they have signed a heads of agreement to pursue a merger supported by both boards. If the merger is approved, the targeted effective date is October 1.

Fitch expects the merger to deliver a larger and more diversified financial institution and said the two are a good cultural fit.

SBS will gain a deeper footing in Hawke's Bay, while HBS will benefit from broader access to funding, products and distribution.

The financial impact of the merger was modest as both already had high levels of liquidity and capital and conservative risk appetites, Fitch said.

The merger agreement provides for the retention of all staff and management at HBS and the 125-year-old HBS brand. There is also a guarantee for continued and increased community distributions through sponsorships and an initial interest rate premium for term depositors.

HBS members will become members of SBS Bank and will have representation on the SBS Bank board.

"In terms of day-to-day operations nothing will change for existing SBS Bank members except the ability to conduct their banking at more North Island branches around the country," SBS Bank chief executive Ross Smith said.

"At the same time, the merger will allow us to take a further step toward being a fully national, mutually-owned 'community' bank."

Earlier this month, Canterbury Building Society (CBS) joined Marac and South Cross Building Society in signing a memorandum of understanding to investigate a merger. Marac is owned by Pyne Gould Corp (PGC).

CBS said today that James Mitchell has been appointed to manage the merger project.

Mr Mitchell spent the last 11 years with ASB Bank Ltd. His appointment follows the establishment of a provisional project board to oversee the merger evaluation process.

PGC chairman Bruce Irvine is chairman and PGC managing director Jeff Greenslade is on the board along with Gary Leech, the CBS chairman, and Geoff Ricketts the Southern Cross Building Society chairman.

Mr Mitchell will report directly to Mr Greenslade, who is the project director.