Pressure piling on Rock

In a sign of a probable, planned bond sale by The Rock Building Society, Moody's released a rating on The Rock on Friday. Moody's assigned 'Baa3/P-3' long- and short-term credit ratings with a stable outlook and a 'D+' bank financial strength rating.

Moody's noted in the ratings report that The Rock operated a low-risk loan book, a conservative strategy and held sound capital levels, all of which is a little favourable.

The Rock raised two rounds of capital last month, more than $11 million in aggregate and equal to more than a quarter of the capital base of The Rock.

A burst of activity by the board and management to address the structure of its balance sheet (and following successful efforts to diversify deposit sources over the last year or so) all suggests pressure from APRA to sort things out.

The Rock capital adequacy ratio was 11.2 per cent at June 2009, enough in the old era but probably much too low for the higher capital ratios APRA now prefers for small ADIs.