S&P checks Equitable's ratings

S&P said Equitable Mortgages is a central part of the wider Equitable group and retained its BB rating, meeting the criteria of the government's extension to the retail deposit guarantee, due to its emphasis on first-mortgage lending and the cornerstone shareholding of the Spencer family.

The rating agency does not think Equitable will require additional shareholder support to meet the Reserve Bank's expected 8% capital requirement, but if this fails to be the case, it predicts the Spencer family will inject enough money into the business to ensure that it does.

"Standard & Poor's believes that the Spencer family is committed to a strategic long-term ownership of Equitable, and will provide capital support to business growth," S&P analyst Mark Legge said in his report. 

Still, the rating agency, which downgraded Equitable to BB from BB+ in March, said the company has weak assets as the commercial property market continues to deteriorate, and has seen general arrears rising substantially over the past few years.