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S&P rating for Bank of India (NZ)

Thursday 31st March 2011

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Standard & Poor's Rating Services has assigned its BBB-/A-3 counterparty credit ratings to newly-registered Bank of India (New Zealand).

Bank of India (New Zealand), was today registered as a bank in this country, taking the number of registered banks in New Zealand to 20.

The on ratings on Bank of India (NZ) were equalised with the those on the bank's parent, Bank of India, reflecting the parent's guarantee of Bank of India (NZ)'s obligations, S&P said.

It also reflected S&P's view that links between Bank of India (NZ) and Bank of India should allow timely payment, if required, under the guarantee.

The unconditional guarantee covered a broad scope of debt obligations, was unlimited in amount, and included clear demand provisions for creditors, S&P said.

It considered that on a stand-alone basis - including ongoing support but excluding extraordinary support from its parent - Bank of India (NZ)'s credit profile was significantly weaker than the parent's.

Factors reflected by S&P's assessment included limited awareness of the Bank of India brand in this country, limited distribution networks, limited local market knowledge, and an expectation for weak earnings.

Other factors were the risks inherent in start-up operations, the evolving nature of the bank's strategy in the competitive New Zealand banking sector, minimal staffing level, and the bank's small absolute capital base.

Cynthia Goldszmidt of S&P's financial services ratings group said those weaknesses were partly offset at the stand-alone level by likely support from the Indian-origin community, expectation for good capitalisation ratios, growing trade relations between India and New Zealand, and what S&P expected would be a well-secured asset portfolio.

S&P expected Bank of India (NZ)'s asset quality could remain a weakness relative to the rating, typical of start up banking operation and given the bank's limited knowledge of the New Zealand market.

That would be mitigated by its integration with and oversight from its parent, its expected risk monitoring and reporting capabilities, and its focus on well-secured retail and business lending.



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