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Heartland's deposit reinvestment rate climbs

Heartland Building Society's deposit reinvestment rate is climbing but it wants to bed down its purchase of PGG Wrightson Finance before making any decisions on withdrawing from the government's retail deposit guarantee scheme.

Friday, 8 July 2011

by Jenny Ruth

At June 30, Heartland had $1.6 billion in retail deposits and cash and liquid assets of $0.6 billion, or more than a third of the debenture book, the company told the stock exchange.

Its reinvestment rate in June rose to 82% compared with an average 77% in the year to date and treasurer Craig Stephen says Heartland's non-guaranteed deposits are tracking ahead of budget.

"Our attention is clearly focused on completing this transaction," Stephen says.

Heartland, which is now ranked 43rd in NZX's Top 50 Index, will gain another about $400 million in debentures with the PGG Wrightson purchase. "I don't know that deposit base anywhere near as well as we know our own deposit base," Stephen says.

Before making any decision on the guarantee scheme, which officially expires on December 31, Heartland wants to ensure the PGG Wrightson investors are comfortable about becoming Heartland investors, he says. "It's all about just being prudent."

Heartland's purchase has already has approval from PGG Wrightson's shareholders and from Heartland's bankers but still needs the approval of PGG Wrightson's debenture holders and other statutory approvals.

Stephen says Heartland doesn't feel any pressure to relinquish the guarantee as a result of Fisher & Paykel Finance's decision last month to do so.

On the contrary, "it's a general positive that they feel they're in a position to do that."

Fisher & Paykel is in a different position from Heartland because its debentures account for less than a third of its total funding and it has a "BB" credit rating while Heartland has an investment grade "BBB-" rating, Stephen says.

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