S&P frowns on NZ Post banking

By RICHARD BRADDELL

Ratings agency Standard & Poor's is maintaining a negative outlook for New Zealand Post due to its banking aspirations, even after downgrading it from AA+ to AA yesterday.

S&P said the downgrading was because of NZ Post's weaker financial position resulting from competition, weak economic conditions and the substitution of traditional mail by technology-based means.

But it also said the outlook remained negative due to risk associated with its planned entry into the already highly competitive banking market.

NZ Post's chief executive, Elmar Toime, said S&P's caution on the proposal to offer banking services through its branch network had been expected.

"In making the decision last Friday to recommend the business case to the shareholding ministers, the board acknowledged that as a start-up business strategy, banking was not without risk," said Mr Toime.

"However, the board is satisfied that in the longer term the bank will add significant value to New Zealand Post."

S&P said that despite the exit of National Mail, competition remained strong.

S&P's associate director of public finance ratings, Brendan Flynn, said: "Nevertheless, Post enjoys a strong market position because of a high degree of customer satisfaction, and offers pricing that is already competitive, with probably the cheapest standard letter rate in the industrialised world."