FIPS Non-Banks: Review of 2017 | KPMG | NZ

FIPS Non-Banks: Review of 2017

FIPS Non-Banks: Review of 2017

Strong performance in New Zealand’s non-bank sector during 2017 driven by lending slowdown in the banking sector.

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KPMG in New Zealand

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Profits up for the non-bank sector, capitalising on the lending slowdown in the banking sector

Profits up for the non-bank sector, capitalising on the lending slowdown in the banking sector New Zealand finance companies, credit unions and other non-bank entities have again experienced strong growth in 2017.

Key findings from the survey reveal:

  • The sector has achieved strong growth, with net profit after tax up 10.20% to $216.67 million and an increase in gross lending of 13.92% or $1.08bn.
  • A key driver of the strong performance has been the slowdown in lending in the banking sector. The banks have been lending less as a result of LVR restrictions on mortgage lending, their voluntary non-recognition of offshore income in repayment calculations and funding pressures due to higher regulatory capital requirements affecting the big four Australian-owned banks. 
  • The availability of low cost funding appears to have reduced slightly in the sector. In some instances, restrictive covenants have been included which dictate where funds can and cannot be lent. In other instances, interest rates have increased. 
  • While credit quality in the sector is robust, a competitive lending market has seen sector interest margin reduce by 40 bps to 5.58. This seems to have reigned in the ability of non-bank lenders to pass on the funding rate increase to their customers; Margins seem to be pressed at both ends. 
  • Non-bank providers are very conscious that having a solid understanding of the customer and ensuring that product and technological innovations are relevant are crucial to their survival.  
  • Fintech was a popular topic of conversation again this year, and not only with ‘Peer-to-Peer’ lenders. Just how the next Fintech wave will come about and by whom the next buzz tool will be developed are questions on the mind of the industry as a whole.

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