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Hanover Finance has welcomed a BB+ rating from Fitch Ratings, and said it would work to further improve its credit rating.
Fitch's ratings on Hanover Finance, and its parent Hanover Financial Services, reflected the company's solid position in the non-bank financial institutions sector, its relatively small size, and exposure to higher-risk property development and investment finance, Fitch said.
"Although HFL has a healthy appetite for risk, it has incurred only minimal credit losses over an extended period. This can be attributed to good risk controls and a relatively benign credit environment."
Compensating for some of the risk associated with property development lending was Hanover's strong profitability, with its return on equity more than 30 per cent, and net interest margins above 5 per cent.
"Nonetheless, Hanover has a lumpy asset profile due to the nature of its core lending which can add volatility to various ratios from year to year, like net impaired loans/total assets."
Hanover chief executive Andrew Schmidt said the company was pleased with the ratings.
"Having established an excellent benchmark for Hanover Finance and Hanover Financial Services, we will now work with Fitch to further improve our credit rating over time."
The company believed mandatory credit ratings by the three major international rating agencies was an important component of a regulatory regime for finance companies. The Ministry of Economic Development is reviewing the regulation of finance companies, three of which collapsed last year.
Hanover, jointly owned by multimillionaires Mark Hotchin and Eric Watson, was established in 1984 to provide finance to the rural sector, and in 1995 started lending to property developers and investors.
Retail deposits make up 96 per cent of Hanover's debt funding. The deposits constitute first-ranking debenture stock, providing investors with a charge over the present and future assets of the company in the event of a wind-up.
Hanover Financial Services is also the parent company of United Finance, FAI Finance and United Home Loans.
- NZPA
