Bank drops S&P rating for Fitch

MARTA STEEMAN
Last updated 05:00 14/12/2013

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The Co-operative Bank has dropped the credit rating provided by agency Standard and Poor's for the more favourable one by Fitch.

The new small bank only requires one credit rating to meet the terms of its banking registration with the Reserve Bank.

The Co-operative Bank was previously the Public Service Investment Society.

The core rating by the two credit ratings agencies of the small bank are the same: BBB minus.

But S&P's has a negative outlook attached while Fitch's has a stable outlook.

S&P yesterday said it had withdrawn its rating of The Co-operative Bank at the bank's request.

The negative outlook reflected S&P's view that economic risks facing all banks operating in New Zealand could worsen "which could weaken their respective stand-alone credit profiles".

The Co-operative Bank's chief executive, Bruce McLachlan, said the board and he decided keeping the Fitch rating, only obtained recently, was in the best interests of the bank.

S&P placed a negative outlook on The Co-operative Bank's rating in May. Later Fitch approached the bank to do a rating, he said.

"The board and I, the management, basically decided it was in our best interests at the moment to go with Fitch".

McLachlan said the bank had not been aware how big Fitch was before that. It was the largest ratings agency in the world.

"Obviously the fact that that's a stable rating had a reasonable part to play in our decision."

Both agencies' reports were "pretty similar" in assessment of the bank. But Fitch and S&P had different methodologies and S&P had a strong emphasis on New Zealand factors rather than bank factors at the moment, McLachlan said.

In May, S&P revised its outlook on eight New Zealand banks to negative on rising national economic risks.

McLachlan said the major banks had ratings from three agencies because they were borrowing large amounts on international wholesale markets but The Co-operative Bank did not borrow on international markets.

McLachlan said it was common business practice to use multiple ratings agencies and it used S&P for other activities it had.

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