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Bulletin: Liberty's Strategy And Capital Management To Remain Stable Following IPO

MELBOURNE (S&P Global Ratings) Nov. 26, 2020--S&P Global Ratings said today that Australia-based Liberty Financial Group Pty Ltd.'s (Liberty) planned IPO for 20% of the group's equity would not materially change the strategic direction and capital management practices of Liberty's largest rated subsidiary, Liberty Financial Pty Ltd. (LFPL, BBB-/Stable/A-3). At the same time, the IPO would add another layer of regulation via the listing on the Australian Stock Exchange, marginally strengthening Liberty's governance, in our view.

The IPO would enable the group to continue pursuing strong growth during periods of benign market conditions via access to a broader pool of capital. We believe LFPL's risk appetite for growth remains strong despite current subdued loan growth due to the pandemic.

In our view, the group would continue to manage capital in excess of 15% under our risk-adjusted capital (RAC) framework despite added pressures for dividend distribution from external stakeholders following the IPO. Historically, Liberty has not paid dividends to private shareholders, while managing capital in excess of 15% under our RAC ratio. Our RAC ratio for LFPL was 17.2% as of June 30, 2020.

We understand that following the IPO, founder Sherman Ma would maintain his controlling interest in the company, supporting our view of minimal change in the group's business strategy and capital management policies following the public offering. We expect the group to continue focusing on residential, automotive, and small business lending in Australia and New Zealand, predominately through third-party channels.

This report does not constitute a rating action.

AUSTRALIA

S&P Global Ratings Australia Pty Ltd holds Australian financial services license number 337565 under the Corporations Act 2001. S&P Global Ratings' credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act).

Primary Credit Analyst:Lisa Barrett, Melbourne + 61 3 9631 2081;
lisa.barrett@spglobal.com
Secondary Contact:Mark P Symes, Melbourne (61) 3-9631-2051;
mark.symes@spglobal.com

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