Fitch Upgrade - more details
http://www.reuters.com/article/2014/10/28/fitch-upgrades-nzs-heartland-bank-affirm-idUSFit80002120141028?feedType=RSS&feedName=financ ialsSector
Heartland Bank Limited
KEY RATING DRIVERS - IDRs AND VR The upgrade of HBL's Long- and Short-Term IDRs and VR reflect the bank's consistent reduction in non-core assets resulting in improved asset quality and stronger earnings. At the financial year end 30 June 2014 (FY14) HBL's non-core asset portfolio stood at NZD41m. HBL expects to reduce the portfolio to NZD26m by end-2014, while maintaining current provisioning levels. At this point the portfolio would be unlikely to present a material risk to the bank's capitalisation and profitability. HBL's funding and liquidity profile is adequate for its rating level. It makes greater use of wholesale funding relative to most of its domestic peers, with a loan/ deposit ratio of 116% at FYE14, leaving it somewhat susceptible to investor confidence. In addition, HBL's on-balance sheet liquidity is lower than domestic peers. This risk is partly offset by HBL's shorter duration loan portfolio. Around 53% of HBL's liabilities maturing within 12 months are covered by maturing assets at FYE14. HBL's business model focuses on lending niche markets in which it has a leading market share. As a result, HBL generates a stronger net interest margin than peers despite the riskier lending profile. Fitch expects HBL's core asset quality to remain sound, benefiting from strengthened underwriting standards and good economic conditions. In addition, HBL's capital ratios are adequate relative to its risks.
RATING SENSITIVITIES - IDRs AND VR HBL's IDRs and VR are sensitive to changes in its company profile and risk appetite. A weaker company profile - mainly reflected in its business model and franchise, could impact the bank's earnings performance and could lead to a change in risk appetite, placing negative pressure on HBL's asset quality and/or capital, funding and liquidity positions. Positive rating action is unlikely in the short- to medium-term.