CBS Canterbury, Southern Cross Building Society, Pyne Gould Corp and its subsidiary Marac announced plans for a "heartland" bank early in June and yesterday confirmed their commitment to the merger.
Establishment board chairman Bruce Irvine said all four company boards would be unanimous in recommending the merger proposal to their respective stakeholders, and subject to regulatory and stakeholder approvals, the merger would take effect from January 1.
"After extensive due diligence, evaluation and independent analysis we are firmly of the view that the merger is compelling and will be beneficial to all parties," Mr Irvine said in a statement yesterday.
The companies between them have almost 70,000 customers, 360 staff and 70 branches or agencies throughout the country. The new entity, listing as Building Society Holdings Ltd, planned to have all outlets continue trading under existing brands.
Brokers from Forsyth Barr and Craigs Investment Partners were positive about the announcement, for both investors and southern borrowers.
Craigs broker Peter McIntyre said the consortium was filling a finance void, such as the loss of South Canterbury Finance to receivership last month, and provided a good opportunity for growth in the South Island.
He said it was unlikely the company would seek to raise capital when it floated in February, as it had signalled it was considering a debt issue in the future, possibly within 12 to 24 months to raise capital.
"They will need sufficient capital on board before the Reserve Bank will give it a licence," Mr McIntyre said.
International banking rule changes this week require banks to hold core capital in a ratio up to 7%, which most Australian and NZ banks have already attained.
Forsyth Barr broker Suzanne Kinnaird said the proposal was positive for investors, offering further portfolio diversity, as it would be the first New Zealand-based bank to list since Westpac New Zealand ceased trading in 2005.
From the perspective of PGC and Marac, the merger would speed up the process for getting an investment grade rating, which is needed to become a bank, she said.
Another benefit was the reduced fee for belonging to the Crown's deposit guarantee scheme, from 1.2% for a finance company to 0.5% for a building society or a bank with a BB+ credit rating, Ms Kinnaird said.
The bank, with its headquarters in Christchurch, would have a nationwide presence, but focus on existing markets in Canterbury, Auckland, Waikato and the Bay of Plenty, lending to niche sectors including small-to-medium businesses, rural businesses and New Zealand individuals and families.
Mr Irvine said earthquake-hit Canterbury would remain a "significant component" of the merged business, with about 28% of the loan book and 39% of the deposit base in the region at present.
"We firmly believe the merger is a compelling value enhancing proposition for members and shareholders that would not otherwise be available to each of us on a stand-alone basis," he said.
The merger was compelling for a variety of reasons, including increased scale, greater liquidity, accelerated growth through a nationwide distribution network, increased market presence and credibility, a diverse asset portfolio and depositor base, and it also had a better case for obtaining an investment grade credit rating and banking licence.
