March 3, 2017 / 2:30 AM / 5 months ago

Fitch Affirms Christian Savings at 'B+'; Outlook Positive

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(The following statement was released by the rating agency) SYDNEY, March 02 (Fitch) Fitch Ratings has affirmed Christian Savings Incorporated's (formerly known as New Zealand Baptist Savings & Development Society Incorporated) Long-Term Issuer Default Rating (IDR) at 'B+' with a Positive Outlook and its Short-Term IDR at 'B'. A full list rating action is at the end of this commentary. KEY RATING DRIVERS IDRS AND VIABILITY RATING The affirmation of Christian Savings' IDRs and Positive Outlook reflects ongoing improvements in its risk appetite and Fitch's expectation that Christian Savings will continue to strengthen risk controls and underwriting over the next year. Christian Savings has also strengthened its management structure with the hiring of a CFO who appears suitably qualified based on previous experience. Despite the improvements, Christian Savings' overall risk appetite remains weaker than other small New Zealand-based lenders; reflective of its business model. Fitch does not consider Christian Savings to be an aggressive lender, although its business model and underwriting standards could be viewed as being of higher risk than other New Zealand lenders. Its core service is providing loans to churches; a segment traditional lenders tend to perceive as higher-risk. Christian Savings' loan pricing and terms are comparable with residential mortgages, reflecting its charitable lender purpose. Low loan/value ratios across its portfolio mitigate some of its risk. Christian Savings has weak capitalisation in absolute terms and relative to other small Fitch-rated New Zealand-based lenders, leaving its capital base more susceptible to shocks that lead to impairments or losses. Christian Savings' low internal capital generation reflects its business model, although its ability to raise additional capital has improved. Fitch expects capitalisation to remain stable in 2017, with strong loan growth offsetting its capital raising efforts. Christian Savings' asset quality is also likely to remain stable; characterised by low loan impairment and write-off levels that reflect its underwriting and well-collateralised position. However, Fitch believes Christian Savings' low impairment ratios do not fully reflect its credit and concentration risk. Its 10-largest exposures accounted for around 40% of total loans at end-January 2017, which is significantly higher than for other New Zealand lenders. Christian Savings' lending activities are fully funded by a combination of church and household deposits. Household deposits account for about half of total deposits and Fitch expects reinvestment rates to remain at a high 80% in 2017. Christian Savings' loan/deposit ratio is ahead of peers and it has a sound liquidity position, although it does not have access to the Reserve Bank of New Zealand repo facility. SUPPORT RATING AND SUPPORT RATING FLOOR Christian Savings' Support Rating and Support Rating Floor are based on Fitch's view that while support from the New Zealand sovereign (AA/Stable) is possible, it cannot be relied upon. Christian Savings is not captured under the Open Bank Resolution scheme, which allows for the imposition of losses on depositors and senior debt holders when a deposit-taking institution fails. However, Fitch sees the existence of such a framework as an indication of a lower propensity for the sovereign to support its banks. RATING SENSITIVITIES IDRs AND VIABILITY RATING An upgrade in Christian Savings' IDRs and Viability Rating will be driven by further improvements in its risk appetite or meaningful increase in capitalisation. Fitch expects positive trends in loan and asset growth, which should broaden Christian Savings' customer base and exposure type, to lower it concentration risk over the next year. The Positive Outlook on the rating could be revised to Stable if Christian Savings loses momentum in its growth prospects or if growth is achieved at the expense of a weaker risk appetite or underwriting standards. SUPPORT RATING AND SUPPORT RATING FLOOR The Support Rating and Support Rating Floor are sensitive to any change in assumptions around the propensity or ability of the New Zealand government to provide timely support. The rating actions for Christian Savings are as follows: Long-Term Foreign-Currency IDR affirmed at 'B+'; Outlook Positive Short-Term Foreign-Currency IDR affirmed at 'B' Viability Rating affirmed at 'b+' Support Rating affirmed at '5' Support Rating Floor affirmed at 'NF' Contact: Primary Analyst Jack Do Director +61 2 8256 0355 Fitch Australia Pty Ltd Level 15, 77 King Street, Sydney NSW 2000 Secondary Analyst Andrea Jaehne Director +61 2 8256 0343 Committee Chairperson Parson Singha Senior Director +66 2108 0151 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1019992 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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