HBS-SBS merger 'a good fit'

Fitch Ratings said the advantages of a proposed merger of SBS Bank, the former Southland Building Society, and Hawke's Bay-based HBS Building Society are more obvious for HBS.

Fitch yesterday affirmed the ratings of both after they said yesterday they had signed a heads of agreement to pursue a merger supported by both boards. If the merger is approved, the targeted effective date is October 1.

Fitch expects the merger to deliver a larger and more diversified financial institution and said the two are a good cultural fit.

SBS will gain a deeper footing in Hawkes Bay, while HBS will benefit from broader access to funding, products and distribution.

The financial impact of the merger was modest as both already had high levels of liquidity and capital and conservative risk appetites, Fitch said.

The merger agreement provides for the retention of all staff and management at HBS and the 125-year-old HBS brand. There is also a guarantee for continued and increased community distributions through sponsorships and an initial interest rate premium for term depositors.

HBS members will become members of SBS Bank and will have representation on the SBS Bank board.

"In terms of day-to-day operations nothing will change for existing SBS Bank members except the ability to conduct their banking at more North Island branches around the country," SBS Bank chief executive Ross Smith said.

- NZPA