Combined Building Society, the New Zealand entity aspiring to become Heartland Bank, says it is in a strong liquidity position. Thirty-two per cent of total liabilities, or more than NZ$300 million, were held in the form of cash and liquid assets as of January 31. Having only recently been formed from the merger of MARAC Finance, Southern Cross Building Society and CBS Canterbury, Combined Building Society has a long way to go before it meets the Reserve Bank of New Zealand's requirements for a banking licence. The key factors are meeting capital adequacy norms, demonstrating access to an efficient cost of funds and showing sustainable earnings. The new merged entity claims its refinance risk is mitigated by spreading the maturity profile of its liabilities, but a closer look reveals that most of the company's funding, with the exception of retail bonds, is due in the next year. As of January 31, CBS derived 85 per cent of its funding from retail deposits, which totalled $1.56 billion; $104 million came from retail bonds; $275 million from a securitisation program, and $200 million from committed undrawn bank facilities. The bonds expire in July 2013. CBS said it is well placed with respect to capital adequacy and has around $265 million in net tangible assets, which works out to 9.2 per cent of capital under non-bank deposit taking regulations. If further capital is required, it could be obtained from Pyne Gould Corporation, if the latter is able to provide it. The financial institution has around $290 million of lending in Christchurch, which constitutes nearly 13 per cent of its total assets. A detailed analysis over the coming weeks will reveal the exact financial impact of the earthquake, which is currently not expected to be material. Meanwhile, ratings agency Standard & Poor's affirmed its BBB- rating on CBS and said it planned no action in the immediate term.