New Zealand-based Canterbury Building Society (CBS), Southern Cross Building Society (SCBS) and Pyne Gould Corporation (PGC) have entered into a memorandum of understanding that involves the proposal to merge their banking related activities.

Reportedly, the merged entity would be listed on the NZSX, with an initial assets of $2.2bn, 360 staff and about 70 customer outlets across the country with headquarters in South Island. The newly formed bank would focus on country’s retail customers, small businesses and agriculture.

It is expected that the merger would be facilitated by combining CBS and SCBS and then by the acquisition of applicable PGC businesses, primarily its wholly owned subsidiary MARAC.

The three entities said in a joint statement: “We believe that consolidating the three well established businesses will achieve the critical mass and quality of assets to support an investment grade credit rating and a banking licence. An asset base of more than $2bn provides the scale and diversity required to support an application for a bank licence.

“We see a significant opportunity in entering the banking market as it is clear to us that New Zealanders and New Zealand businesses are seeking an alternative to the incumbent banks in the markets we intend targeting.”

The merged entity is expected to commence operations by early next year, if all the proposals are approved. Following the primary approvals the banking application would be made by the middle of 2011.