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Equitable scores S&P rating

Standard & Poor's has given Equitable Mortgages a BB+ long-term and B short-term issuer credit ratings. The outlook on both companies is stable.

Friday, 30 November 2007
S&P say that the two companies, Equitable Mortgages and Equitable Life, are core companies within the Equitable group.

It is a non-bank financier with long-standing expertise in commercial-property lending. Strengths underpinning the ratings on the companies include the group's good asset quality, supportive shareholder, and manageable and decreasing related-party lending. Offsetting these strengths are Equitable's concentration in large counterparty borrowers and commercial property assets, declining profitability and interest margins, and rudimentary but improving risk-management practices.

"Equitable is considered to be one of the more financially sound non-bank deposit-taking (NBDT) companies in New Zealand," S&P credit analyst Shaun Evans says.

"Despite the difficult conditions experienced in the NZ NBDT sector this year, Equitable has demonstrated considerable flexibility and attention to matters impacting its financial strength, evidenced by the recent sourcing of two additional bank funding lines totaling $125 million."

The stable outlook reflects Standard & Poor's expectation that both companies will remain core to Equitable, and that Equitable's financial characteristics, measured growth strategy, and strong shareholder support will be maintained in the medium term.

Equitable may be challenged to increase profitability, considering that some contraction of interest margins, higher costs, and possibly some higher level of credit provisions are anticipated. Nevertheless, we expect that Equitable's future profitability, taking into account its risk profile, should remain generally consistent in the medium term with ratings assigned.

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