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Fitch Affirms New Zealand Association of Credit Unions at 'BB+'/Stable
December 13, 2016 / 1:56 AM / a year ago

Fitch Affirms New Zealand Association of Credit Unions at 'BB+'/Stable

(The following statement was released by the rating agency) SYDNEY, December 12 (Fitch) Fitch Ratings has affirmed New Zealand Association of Credit Unions' (trading as Co-op Money NZ) Long- and Short-Term Issuer Default Ratings (IDR) at 'BB+' and 'B' respectively. The Outlook on the Long-Term IDR is Stable. KEY RATING DRIVERS The affirmation of Co-op Money NZ's IDRs and Stable Outlook reflect Fitch's view that the association is likely to maintain a comparable level of performance over the next year or two. Co-op Money NZ's ratings are constrained by its moderate franchise and small customer base. Although it serves all the credit unions and building societies in New Zealand, the combined market share of its members is low relative to the financial system. Geographical concentration and limited financial flexibility also means it is unlikely to reach investment grade ratings. Co-op Money NZ is primarily a trade organisation and service provider to its members, offering sector support, central banking services, IT support and payment solutions with scale benefits that members cannot achieve individually. Co-op Money NZ is a business-to-business financial service provider and it has no direct exposure to the end-customer outside of its wholly owned insurance subsidiary - Credit Union Insurance Limited, which trades as Co-op Insurance NZ (IFS: BBB-/Stable). Co-op Money NZ also offers its services to institutions outside of its member base, an area that Fitch believes will be the main driver of future growth. At the end of the financial year to June 2016 (FYE16), the provision of central banking services accounted for the majority of Co-op Money NZ's balance-sheet assets and non-equity balance-sheet funding. Deposit concentration is high due to the low number of members and customers. Co-op Money NZ's liquid asset holdings were also concentrated, mainly in the major banks, although the high quality and short duration of its holdings mitigate some of this risk. Fitch expects Co-op Money NZ's profitability to remain flat in FY17. The association's absolute profit levels are low, which reflect its scale and the subsidies provided to members for services provided. Profitability has been constrained by high investment expenses related to IT and software development, however, this investment has also helped the association to expand its non-member revenue sources and customer base, which should benefit earnings in the long term. Co-op Money NZ's capitalisation is adequate for its size and operations. The association does not hold any debt but this is reflective of its business model as a service provider. Fitch believes Co-op Money NZ's capital is more susceptible to shocks than that of broader industry peers due to its significant concentration, small absolute capital base and limited access to new capital. RATING SENSITIVITIES Co-op Money NZ's ratings are sensitive to developments in New Zealand's non-bank financial institution sector. Negative rating action could take place if Co-op Money NZ were to lose the confidence of its members, resulting in member exits or dysfunctional operation of the association Significant diversification of Co-op Money NZ's non-member revenues and an increase in capital and profitability levels would be required for positive rating momentum, which Fitch considers unlikely in the short term. Contact: Primary Analyst Jack Do Associate Director +61 2 8256 0355 Fitch Australia Pty Ltd Level 15, 77 King Street, Sydney NSW 2000 Secondary Analyst Tim Roche Senior Director +61 2 8256 0310 Committee Chairperson Mark Young Managing Director +65 6796 7229 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: Additional information is available on Applicable Criteria Global Non-Bank Financial Institutions Rating Criteria (pub. 15 Jul 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1016360 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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