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| Heritage Bank Retail Bonds Rated 'BBB+' |
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HERITAGE BANK RETAIL BONDS RATED ‘BBB+’
Melbourne, Thursday 17 May, 2012 – Australia Ratings has assigned a credit rating of ‘BBB+’ to the Heritage Bank Retail Bonds (the “bonds”). This rating is the highest long-term rating in the intermediate category of creditworthiness on the rating scale of Australia Ratings (see the rating scale below). The bonds are senior and unsecured debt obligations of Heritage Bank Limited. The bonds rank below secured debt in Heritage Bank’s capital structure but above ordinary equity.
Australia Ratings also assigns a product complexity indicator of ‘GREEN’ to the bonds indicating that Australia Ratings considers the bonds to be a debt investment with simple and straight forward terms and conditions. An investment in the bonds is expected to give an investor a quarterly payment of interest and the return of the principal invested at the maturity of the bonds in June 2017.
Heritage Bank is the largest mutual bank in terms of asset size and has a simple business model focused on residential mortgage lending and associated consumer finance products.
The credit rating reflects the following key strengths of Heritage Bank’s business:
- a low risk portfolio of residential mortgages with below industry average arrears and losses;
- a conservative risk appetite with regard to maintaining capital and liquidity above regulatory capital requirements; and
- a diversified funding base with experience in raising funds via both wholesale and retail funding markets.
The credit rating also reflects the following key risks to Heritage Bank’s business:
- a slowing of demand and increased competition in the residential mortgage market which may constrain earnings growth;
- an unexpected jump in unemployment or sharp declines in residential property values could lead to losses that will diminish the capital base of the bank; and
- a reliance upon retained earnings to build capital base for future growth.
The bonds have been assigned a GREEN Product Complexity Indicator. A GREEN designation indicates the terms and conditions of the bonds are simple and straightforward with a very low level of complexity on Australia Ratings’ five point Product Complexity Indicator scale.
For more information contact:
Chris Dalton, 0403 584 600, chris.dalton@australiaratings.com
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