S&P says Kiwibank's rating could fall if bank privatised

Thursday 27th May 2010

Ratings agency Standard and Poor's says Kiwibank keeps its rating for now, but could change with privatisation.

Currently it has an AA- rating with a stable outlook.

S&P says the rating remains unchanged although there is speculation about the possible privatisation of Kiwibank and also following the recent announcement of the current chief executrive Sam Knowles.

"Our ratings continue to reflect our expectation that notwithstanding the recent discussion on possible privatisation of Kiwibank, the risk of privatisation remains low in the medium term.

"Nevertheless, in our less-likely downside scenario, privatisation of the bank would be expected to put downward pressure on the ratings."

The current ratings on Kiwibank are equalized with the bank's wholly government-owned parent New Zealand Post (AA-/Stable).

The ratings on the bank get a significant uplift from the bank's stand-alone credit profile due to an unconditional and irrevocable guarantee from the parent.

Consequently, any change in the bank's ownership--which would likely be accompanied by a dilution in the parent guarantee--would be a possible trigger for rating review.

"We do not expect any disruption in the bank's strategy or operations due to the retirement of the chief executive. We consider this transition to be a part of an orderly succession," S&P says.

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