SBS Bank launched its continuous-issue 10-year SBS capital bond yesterday.
The bond had an initial interest rate of 6.75% until October 31, which was fixed for the first five years, following which a quarterly floating rate would be applied.
SBS chief risk officer Mark McLean said the product demonstrated another benefit for SBS customers. In an interview he said he also hoped the rate would attract new members to SBS.
``We're very keen for our customers to have the opportunity to participate in the SBS capital bond, which is a much higher-yielding product than anything we currently offer.''
The capital bond formed part of the bank's growth and expansion strategy.
During the past 12 months, SBS had experienced solid growth and the launch of the bond would enable the bank to continue to raise capital into the future.
SBS was aiming to raise $75million from the capital bond by March 31, 2018 - the bank's balance date - and a total of $140million by 2022.
Asked about the high interest rate, Mr McLean said SBS had looked at similar offerings from other small banks in New Zealand and felt 6.75% was a rate which would get good support.
``If we set it right, it will provide a healthy return back to investors. It will give a good return to our existing members and attract new members.''
The capital would provide a solid platform for future growth.
Earlier this year, SBS Bank bought The Warehouse Group Finance Services for $18million.
SBS was a small franchise experiencing good growth. The capital bonds would assist future growth, Mr McLean said.
