Building Society Holdings, which aims to become a 'Heartland Bank', says it has NZ$590 million to fund growth

By Gareth Vaughan

Building Society Holdings, the entity created through the merger of Pyne Gould Corporation's Marac Finance, CBS Canterbury and the Southern Cross Building Society, says it has NZ$590 million to fund expansion and NZ$289 million worth of lending exposure to earthquake hit Christchurch.

The group revealed this when releasing financial statements as of its January 7 establishment date and a separate presentation to a First NZ Capital conference.

In a presentation on the financial statements Building Society Holdings, which ultimately aims to become a Christchurch-headquartered "Heartland Bank" that doubles its NZ$2.2 billion asset base within five years through growing family, small business and agricultural lending, puts its capital ratio under the Reserve Bank's non-bank deposit taker regulations at 9.6% versus the minimum requirement of 8%.

This gives the group about NZ$43 million of excess capital.

Building Society Holdings also said it had liquidity of NZ$590 million comprised of NZ$285 million in cash, NZ$200 million of committed undrawn bank facilities with BNZ and Westpac, and NZ$105 million of unutilised securitisation facilities (with NZ$169 million utilised through motor vehicle and residential mortgage backed security programmes with Westpac).

The liquidity would "provide a platform for growth."

Earlier in the year Building Society Holdings CEO Jeff Greenslade acknowledged an interest in acquiring PGG Wrightson Finance, should the rural lender be put on the block.

The group is covered by the extended Crown retail deposit guarantee scheme until December 31 this year and plans to apply to the Reserve Bank to become a bank during the second half of the year.

Building Society Holdings, which has a BBB- investment grade credit rating from Standard & Poor's,  has NZ$1.67 billion of retail funding and says investor reinvestment rates have been running around 80% over the past six months.

In the First NZ Capital presentation, Building Society Holdings subsidiary Combined Building Society says New Zealand banks are skewed towards residential property lending meaning its target market of small and medium sized businesses is currently under serviced, whilst in the rural sector the major banks "appear over weight and may need to reduce their exposure."

The First NZ presentation notes 29% of the group's retail funding is not covered by the Crown guarantee with 10% from call and savings accounts and 61% carrying the guarantee. Meanwhile the presentation also provides further detail of Combined Building Society's exposure to Christchurch following the devastating February 22 earthquake.

The group has previously said it expects no material financial impact from the earthquake with 13% of its total receivables book exposed to Christchurch. Today it said this includes a NZ$115 million residential portfolio with 760 mortgage customers, NZ$82 million of business lending, NZ$73 million of consumer lending predominantly in car loans, and NZ$19 million worth of commercial plant and equipment loans.

* This article was first published in our email for paid subscribers this morning. See here for more details and to subscribe.