Marac says it's "very pleased" with investor uptake of its non-Crown guaranteed deposits but bemoans that the guarantee has led to some investors' failing to do their homework and investing in some financial institutions solely because they are guaranteed.
Marac funding manager Stuart Mainwaring says the finance company has received about NZ$2 million of funds per week since re-offering non-Crown guaranteed retail deposits in January and has about NZ$50 million in total now invested in them. The comments came in the Pyne Gould Corporation owned Marac's quarterly investor newsletter.
Peter Sikora, Standard & Poor's director of financial institutions ratings for Australia and New Zealand, recently told interest.co.nz the credit rating agency was closely monitoring the volume of debenture rollovers finance companies face just prior to the end of the Crown retail deposit guarantee schemes.
“Clearly at some stage the finance companies will need to start living in a world without the benefit of a government guarantee,” Sikora said.
“There will come a time next year, even for those who have been accepted into the extended guarantee, where we’re going to need to see evidence of then being able to raise non-guaranteed funding. And absent that ability downward rating pressure is certainly not off the table.”
Marac is covered by the initial Crown retail deposit guarantee scheme that expires on October 12 and has also been accepted into the extended scheme which runs from October 12 until December 31 next year. It has a BB+ rating from S&P.
Marac is offering 7.25% for non-guaranteed 18 month debentures and 4% for guaranteed debentures. See all bank and building society debenture and deposit rates here.
Its parent PGC is in talks with the Southern Cross Building Society and Canterbury Building Society about a merger, incorporating Marac, to create a Heartland Bank.
Meanwhile, Marac also said in its newsletter that a large number of investors were currently relying on the Crown guarantee for the security of their investments even though it would be gone at the end of 2011 and the major banks were unlikely to be covered beyond October 12.
"The guarantee has led some investors to skip ‘doing their homework’ on a financial institution," Marac said.
"Instead, they are simply asking 'do you have the Crown guarantee?'."
It noted that before the guarantee was introduced in October 2008, investors' had to do their research and learn about the company behind their investment. This included the company’s financial performance, credit rating and the investment’s security ranking.
"It’s increasingly important that investors ask these and other such questions as the guarantee is phased out," Marac said.