PSIS has prospect of investment-grade debt rating

PSIS knocking on door of investment-grade credit rating

By Paul McBeth

July 15 (BusinessDesk) – PSIS Ltd., the mutual that evolved out of the Public Service Investment Society, is knocking on the door of an investment grade credit rating after Standard & Poor’s revised its outlook to ‘positive.’

S&P affirmed PSIS’ BB+ rating, saying the company’s “low-risk and sound credit profile” underpinned the revised outlook, which gives the firm a one-in-three chance of an upgrade to BBB- over the next two years. This comes after the collapse of the finance sector and global credit crunch sapped lenders’ ability to meet their obligations, and a number of companies have had their credit ratings cut deeper into speculative, or junk, status.

“The positive rating outlook reflects our expectations that the ratings could be raised to BBB-/A-3 if the company continues to successfully manage its low-risk and sound credit profile through to 2011, a period when the non-bank deposit taking sector in New Zealand is expected to come under pressure,” said credit analyst Peter Sikora. “The outlook could be revised to stable should there be signs that deposit support was not as strong as anticipated.”

The upbeat outlook for the mutual’s credit rating comes after PSIS reported a record net profit of $13.2 million in the year through March, though the increased competition for deposits would likely prevent the firm from repeating its success.

S&P said the firm’s low credit risk profile offset its concentration in a single sector with a narrow product focus, and its conservative underwriting practices underpinned good asset quality.

(BusinessDesk)

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