Canterbury Building Society gets BB+ credit rating; can join extended guarantee

Canterbury Building Society has been awarded a BB+ credit rating from Standard and Poor's which will allow it to enter the extended deposit guarantee scheme if it wishes from October next year until the end of 2011. The outlook on the rating is stable, S&P said. Here is the release from Standard and Poor's:

Standard & Poor's Ratings Services said today it had assigned its 'BB+/B' counterparty ratings to Canterbury Building Society (CBS). The outlook is stable. The ratings reflect CBS' small capital base by international standards, and its large commercial exposures relative to capital. Offsetting these factors are CBS's good regional franchise and 134-year history in the Ashburton-Christchurch (Canterbury) region of the South Island of New Zealand and its stable retail-funding base and good liquidity. CBS is a building society and nonbank deposit-taking institution (NBDT) whose credit standing compares well with local peers. It offers mainly residential and commercial lending, funded by retail deposits. "The stable outlook reflects our expectation that CBS' sound financial profile will remain intact during the current economic downturn," Standard & Poor's credit analyst Gavin Gunning said. "We expect that while nonperforming assets and specific provisioning could potentially show some volatility, they should nonetheless remain sound by both domestic and international standards at the current credit rating level. Continued stable retail-funding capabilities and good liquidity also engender confidence that CBS will maintain a stable rating outlook." On the other hand, negative ratings momentum would be likely if major adverse operational, reputational, or other risk events affected CBS, considering its small capital base. Positive ratings momentum is not expected in the short-term although eventually may be achieved. "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. Factors favorable to a higher rating would be the ongoing conservative management of credit and noncredit risks; consistently above-peer asset quality, funding, and liquidity; and plausible growth strategies that emphasize enduring good quality lending growth," said Mr. Gunning.