NZ police credit union gets BB+ credit rating

Police credit union, with NZ$68.9M of assets, is first to get rating: BB+

July 10 – The Police and Families Credit Union gained a BB+ credit rating with Standard & Poor’s, becoming the first credit union to take that step in preparation for central bank requirements on non-bank deposit takers.

The organisation’s total loan book is about NZ$41 million – mostly personal loans to members, who must be current or retired police officers. The police can obtain loans for up to 10 years at 8.99%, according to general manager Brian Sprowell. Some NZ$11.9 million of the book is in home loans.

The credit union doesn’t plan to use its credit rating to tap financial markets. “We’re solely an organization for the police and it’s a strict members-only organization,” Sprowell told BusinessWire. Obtaining the rating was “not cheap bit it’s a requirement now under the new regulations.”

It has built up total assets to NZ$68.9 million since opening for deposits in 1974. In the year to June 30, 2008, it posted a profit of NZ$1.1 million on revenue of NZ$6.1 million, according to the prospectus available on the credit union’s web site. The short-term rating assigned by S&P is B and the outlook is ‘stable.’

“We view the credit union's sustainable business model, very good asset quality, and overall sound financial profile as strengths that underpin the ratings," said Gavin Gunning, an S&P credit analyst, in a report. Its competitive position is “sound as it is not in direct competition with banks, unlike many community-based and regional credit unions."

Still, the credit union has a comparatively small capital base, and its small staff leaves it open to “key person risk.”

(BusinessWire)

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