(12 October 2004 – Australia) Ratings agency Standard & Poor’s has assigned agribusiness lender Elders Rural Bank a BBB- long term and A-3 short term counterparty credit ratings.S&P said the long term outlook on Elders, which was formed in 1999 as joint venture between Bendigo bank and Futuris Corp, was stable.
S&P financial services credit analyst Craig Bennett said the ratings reflected the bank’s sound niche market position, earnings profile and well diversified funding base in the Australian rural banking sector.
But he said this was offset by the bank’s exposure to the volatile agricultural commodity sector.
“ERB’s credit profile, however, is constrained by its rural sector concentration, which is regarded as a higher risk and more volatile lending sector, despite the bank’s favourable recent asset quality,” Bennett said.
“ERB is expected to successfully maintain its favourable asset quality position, which has proven resilient through the recent drought conditions – the worst in 104 years,” he said.
“The bank’s level of earnings is likely to benefit from asset growth, although its net interest margin may come under pressure as competition increases for both loans and, to a lesser extent, funding.”
Elders posted a profit of A$21.8 million for the year to June 30, 2004, a 15 percent increase on the previous year.
The bank said its gross loans had grown by 27 percent, totalling A$1.86 million by the end of the year.