More credit union and finance company ratings assigned

More credit ratings are flowing through for small deposit-taking entities in New Zealand as the sector seeks ratings to meet the needs of the new regulatory regime.

Standard & Poor's last week assigned 'B+/B' long- and short-term credit ratings to the Napier-based Manchester Unity Credit Union. The outlook is stable for MUCU which, S&P noted, has "a very small capital base by international standards, and below-peer capital ratios, at-call deposit base, and key-person risk associated with the small size of its business operations."

These factors are, however, "offset by MUCU's very good credit-loss history and its low risk appetite."

Fisher & Paykel Finance Ltd was assigned 'BB/B' long- and short-term credit ratings, with a stable outlook, reflecting its good market position in the New Zealand consumer finance segment, its diversified customer base and its good risk-management capabilities. These factors are offset by its exposure to the cyclical consumer segment and its reliance on continuing banker confidence and support.

S&P also factored in its view of F&PFL's parent, Fisher & Paykel Appliances Holdings (not rated), which S&P said influences but does not constrain its view of F&PFL.

Nevertheless, S&P said the ratings assigned to F&PFL could be raised if it were to become more independent from the parent.

S&P also assigned the same ratings to PGG Wrightson Finance Ltd., with a stable outlook. PWF is a moderate-sized New Zealand-based finance company specializing in rural finance. The company is a wholly owned subsidiary of PGG Wrightson (not rated), a rural services company based in New Zealand.

The ratings on PWF reflect S&P's opinion of the company's exposure to the agriculture sector, which is riskier than some other sectors, and its high but reducing counterparty concentration risk. Nonetheless, these weaknesses are offset by the company's good brand in New Zealand's rural finance services market, stemming from the company's national footprint and access to its parent's broad distribution platform and large rural client base. PWF's reasonably diversified funding sources also support the ratings, S&P said.

S&P also assigned 'BB/Stable/B' ratings to Credit Union North, Credit Union South and Client Reserve Ltd.