NZ Post drags down Kiwibank credit rating outlook   1 Feb 2012

Paul McBeth

State-owned Kiwibank has had the outlook on its credit rating dragged down by the “ongoing structural decline” of parent New Zealand Post’s delivery business, according to Standard & Poor’s.

The rating agency affirmed Kiwibank’s ‘AA-minus‘ credit rating, but put it on a negative outlook, giving it a one-in-three chance of a downgrade over the next two years, aligning the bank with its parent company. S&P said the ratings would mirror each other “unless there is a significant dilution or withdrawal of the guarantee provided by New Zealand Post.”

The affirmed rating reflects Kiwibank’s “moderate” risk position that recognises its “high growth and its adequate-but-less-developed risk management capability,” S&P said. The bank’s asset quality compared favourably with its peers and is sound by global standards. Still, impairments shot up in the last financial year because of its exposure to Christchurch and changes to its credit provisioning policy.

“We believe that there are no significant changes in rating factors, other than the change in the outlook of the bank’s parent, that affect our rating assessment of Kiwibank,” S&P credit analyst Nico de Lange.

S&P affirmed NZ Post’s AA-minus rating and put it on negative outlook, saying the decline in standard letter delivery business will make the state-owned enterprise “will become increasingly reliant on more competitive earning streams such as parcel and express courier deliveries, which will place further pressure on its business risk profile.”

NZ Post last week increased its parcel rates and introduced rural delivery charges to cover rising fuel costs, and has had to contend with declining earnings over the past couple of years as people eschew traditional postal services for electronic delivery.

Kiwibank was flagged as a “significant contingent liability for the group” and is a weight on NZ Post’s credit quality. The bank’s borrowings and mainly at-call deposits have shorter maturities than its loan book, though that’s mitigated by its holdings of good quality liquid investments.

S&P said the bank had a moderate business position, with its exposure to potential competitive pressure from the big four Australian-owned banks, but is looking at ways to tap into NZ Post’s distribution networks to grow its operations.

The bank had strong capital and earnings factors with its risk-adjusted capital ratio able to accommodate growth, and a satisfactory capital structure.

“Although Kiwibank generates sufficient earnings to cover our estimation of normalised losses (the three-year average earnings buffer is about 136 basis points), the bank’s key earnings metrics are weaker relative to peers, largely due to its lower net interest income level,” S&P said.

The bank’s funding was deemed to be “average” owing to its rapidly growing retail deposit base, supplemented by wholesale borrowing, and liquidity was “adequate.”

Last month, Kiwibank bought Gareth Morgan Investments, including its KiwiSaver business, for an undisclosed amount as it seeks to broaden its exposure to wealth management.

(BusinessDesk)

Add a comment

Bookmark and Share

News

Terror in Canada: There were gunmen on roof says Kiwi

24 Oct 2014 News
Ottawa resident says shock turning to anger and hard questions being asked about how gunman got so far. A New Zealander in Ottawa was... more

NZ Government Urged to Do More to Fight Ebola

24 Oct 2014 News
New Zealand Government Save the Children Urges the NZ Government to Do More to Fight Ebola As Ebola continues to tear through West... more

Business

Sky TV to launch $20/month subscription ondemand service

24 Oct 2014 Business News
By Fiona Rotherham Oct. 24 (BusinessDesk) - Sky Network Television, the country's dominant pay-TV operator, will launch a new $20 a... more

Jade chases growth of 30-50% for Master Terminal

24 Oct 2014 Business News
By Paul McBeth Oct. 23 (BusinessDesk) - Jade Software, which took its intelligence software developer Wynyard Group public last... more

Living

My Kitchen Rules contestants: Hear us raw

24 Oct 2014 Food & Wine
Fresh from two consecutive MKR People's Choice Challenge wins, Neena and Belinda favour wholesome and earthy flavours and aim to... more

Kiwi comics destroy world record for chart-topping podcast

24 Oct 2014 Lifestyle
  New Zealand comedians Guy Montgomery (Billy T winner, 7 Days) and Tim Batt (Radio Hauraki, 7 Days) have broken the world record... more

Property

Double-digit rate increases loom

24 Oct 2014 Property
Aucklanders living in the ‘hottest suburbs’ could be the big losers, while businesses will come out winners Rate rises... more

Reform of RMA critical to reforming housing affordability

15 Oct 2014 Property
The Resource Management Act needs to explicitly recognise the importance of New Zealanders’ access to more affordable housing... more

Migration

New Zealand Named The Best Place For Raising Children

24 Oct 2014 Migration
New Zealand has been named the best place to raise a child in the Raising Children Abroad annual league table. According to the HSBC... more

Desperate employers keeping overstayers

24 Oct 2014 Migration
Desperate employers seeking to fill job shortages are keeping migrant workers who previously held a work visa in New Zealand... more

Travel

Air New Zealand's GENIUS Hobbit themed safety video

24 Oct 2014 Travel & Tourism
Giving flyers an Unexpected Journey! Elijah Wood and Sir Peter Jackson star in 'epic' Hobbit themed Air New Zealand safety video Air... more

Travel 'interns wanted' to tour 2000km of NZ

24 Oct 2014 Travel & Tourism
Forget a summer internship of fetching coffee and photocopying - a travel company is offering a $30,000, 10-day, 2000km tour of New... more

Sport

Kiwi to play against All Blacks in November Test Series

24 Oct 2014 Rugby
Scotland coach Vern Cotter clears out old guard and makes Grant Gilchrist captain for November Test series No place for Barclay,... more

ActivePost junior cricketers have a go with BLACKCAPS heroes

24 Oct 2014 Cricket
  Hamilton’s youngest cricketers will take their talent to the pitch this long weekend for the ANZ One Day International... more

Columns

At last! Hope for St James Theatre

24 Oct 2014 Opinion By Brian Rudman
After all the delays and stonewalling, the St James finally looks to have a future, even if it’s not clear what it will be Let's... more

Gordon Campbell: tokenism of NZ‘s role against Islamic State

23 Oct 2014 Opinion By Gordon Campbell
Gordon Campbell on the tokenism of New Zealand‘s role against Islamic State Was John Key born lucky or what? Political... more

Kiwi Success

Jim Hickey hangs up his umbrella

24 Oct 2014 People
Veteran weathercaster Jim Hickey has announced his retirement today, saying is was a tough decision. "I feel like I'm subbing off at... more

Corban honoured by Institute of Directors

17 Oct 2014 Appointments
Institute Of Directors Local businessman Brian Corban was made a Distinguished Fellow of the Institute of Directors yesterday, in a... more

Recruitment

UK ambulance service poaches Kiwi paramedics

24 Oct 2014 Recruitment
New Zealand paramedics are being poached by Britain's busiest ambulance service. Interviews were held in Auckland on Friday and... more

NZ job market expected to strengthen - survey

24 Oct 2014 Recruitment
The job market is expected to strengthen and potential employees are increasingly looking at staying in New Zealand for work instead... more