Kiwi finance companies face more competition | KPMG | NZ

Kiwi finance companies face more competition

Kiwi finance companies face more competition

2015 has been a year of fast-paced competition and change for New Zealand’s non-bank financial sector.

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It’s been a year of fast-paced competition and change for New Zealand’s non-bank financial sector, reports KPMG.

Released today, KPMG’s Non-Bank Financial Institutions Performance Survey (FIPS) surveyed 23 of New Zealand’s non-bank financial institutions, and analyses the sector’s performance to 30 September 2015. 

The sector achieved net profits of $254.62m in 2015, which was a 6.7% decrease from 2014. Although there were strong increases in interest and other income, this was more than offset by an increase of operating expenses of $48.49m. 

John Kensington, KPMG’s Head of Financial Services, says this was a solid performance considering the challenging environment. “This performance is a remarkable achievement considering the current low interest rate environment; and the intense competition coming from both existing market players and new entrants, banks and peer-to-peer lenders.” 

One of the big stories of the past year has been the emergence of peer-to-peer (P2P) lenders; including Harmoney, Squirrel Money, LendMe and LendingCrowd. “New Zealand now has four P2P licensed to operate in the market…they’ve definitely arrived,” says John Kensington. 

“Executives we surveyed agreed that P2P lenders are the biggest disruptor in the personal/consumer market space at the moment.” 

Another big theme for the year was the level of sales and acquisitions. GE Capital has signed agreements to sell its New Zealand consumer and commercial financing businesses. Soon-to-be-rebranded Warehouse Money is now wholly-owned by the Warehouse Group, and Fisher & Paykel (F&P) Finance has sold to ASX-listed FlexiGroup for $315m. “

A number of executives we spoke to believe that this natural disruption will create some significant opportunities in the sector, given that some long-term relationships within those businesses have come to or are coming to an end.” 

Key findings from KPMG New Zealand’s 2015 Non-Bank Financial Institutions Performance Survey:

  • The non-bank sector achieved profits of $254.62m. Compared to 2014, the overall result was a decrease in net profit after tax by 6.67% or $18.2m.
  • The sector faced increased margin pressure, with the interest margin decreasing some 32 basis points. In addition, the sector incurred additional cost based around compliance with regulation, and improving the technological front-end of their businesses.
  • There has been less direct competition from banks this year – instead, banks have tended to fund non-bank entities with additional facilities or securitisation vehicles.
  • Lenders in the motor vehicle industry have been under pressure – as they face compressed margins and new entrants in the market.
  • Consumer and business confidence has driven a buoyant market in consumer lending, small SME lending, and above LVR of 80% lending.
  • Overall, the non-bank sector is optimistic about business opportunities heading into the 2015/2016 year.

For more information, contact

John Kensington
Head of Financial Services
+64 9 367 5866
+64 021 769 596
jkensington@kpmg.co.nz

Suzanne Bredenkamp
External Communications
+64 9 363 3459
+64 21 242 3081
sbredenkamp@kpmg.co.nz

FIPS Non-Banks: Review of 2015

FIPS Non-Banks: Review of 2015

NZ’s non-banks faced increasing margin pressure in 2015, decreased interest margin, additional compliance cost & front-end technological improvements.

© 2017 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

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