CUA set to tackle wholesale funding mix

Credit Union Australia may be moving to cut its increasing reliance on short term wholesale funding, with a second long term credit rating to support marketing.

Moody's Investors Service on Friday said it assigned CUA a long-term term issuer rating of A3 and a short-term rating of P-2. The outlook for the ratings, which apply to CUA's wholesale obligations, is stable.

The mutual already holds a BBB+ long term rating through Standard & Poor's.

CUU wrote in an email that the Moody's rating was "a good result for CUA as it is the highest rating available to mutuals and is a second rating for CUA."

"This will assist CUA when we are undertaking future capital raising activities. The rating recognises our strong asset quality, our low risk and geographically diverse residential loan book, healthy capital levels and our mutual ownership."

Wholesale funding makes up approximately 29 per cent of CUA's total funding, Moody's pointed out in its assessment.

"Historically, CUA was heavily reliant on securitisation to fund loan
growth," Moody's said.

Securitisation has steadily reduced to 18 per cent of total funding at
December 2014 from a peak of 41 per cent in 2007.

Offsetting this decline, Moody's said, CUA had increased its use of other forms of wholesale funding, in particular its issuance of short-term debt which has progressively grown to around nine per cent of total funding while long-term debt makes up two per cent.

"Over time we expect CUA's proportion of long-term funding to increase, which we would view to be a credit-positive development that is factored into the assigned rating," Moody's said.