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Secured debentures now exceed $10 billion

Secured debentures now exceed $10 billion

Research by http://www.interest.co.nz shows that the finance company debenture market broke through $10 billion in deposits for the first time in the December 2005 quarter.

The finance company debenture market grew by +17.7% in 2005, rising by more than $1.5 billion, from $8.7 billion to $10.2 billion. The unsecured non-bank market (mainly building societies and financial co-operatives) also grew strongly rising +14.4% to $4.2 billion.

Our research suggests that part of the growth in secured debentures has been because of consistently high returns available to investors, contrasting with uncertain and volatile outcomes offered by alternative high-return asset classes. Debenture investing can also be done on a DIY basis, appealing to the desire of many kiwi investors to avoid the relatively high fees in the share and managed funds markets.

The overall term deposit market, including banks, building societies, and finance companies, grew an estimated +8.7% in 2005 to a record $76 billion.

The rate of growth in all sectors, except the unsecured non-bank market, slowed in the final quarter, potentially reflecting the beginnings of a slowing trend in the economy.
$ million 2004 2005 change %
for the year ended December

Main 4 banks 53,658 57,200 +3,542 + 6.6
Other banks 3,977 4,450 + 473 +11.9
NBFI secured 8,691 10,227 +1,536 +17.7
NBFI unsecured 3,664 4,190 + 526 +14.4

Totals $ 69,990 $ 76,067 +6,078 + 8.7
Banks saw their market share slip by -1.2% to just under 81%, while finance companies saw theirs rise by +1.0% to almost 13.5%. Building societies also had a market share gain.

The institutions with the biggest growth in 2005 retail term deposits are: #1 ANZ-National Bank $ +1,458 mil + 6.7% #2 BNZ +1,227 +11.7% #3 ASB + 657 + 7.1% #4 SBS + 323 +21.2% #5 South Canterbury Finance + 288 + 41.9% #6 Kiwibank + 280 +70.9% #7 Westpac + 200 + 1.6% #8 Hanover Finance + 176 +24.9% #9 HSBC + 161 + 9.5% #10 MARAC + 125 +16.4%

These ten institutions account for almost $4.9 billion, or 79%, of the $6.2 billion in retail term deposit growth in 2005.There are 82 retail deposit-taking institutions in this survey.

www.interest.co.nz maintains a comprehensive database of all New Zealand financial institutions that offer deposit products to investors, and it can be accessed free on their website. Market share data is available to registered users (also free).

Making sense of the relative strengths and weaknesses of all these institutions can be done by referring an institution's SQP Score©. This proprietary coding system assesses the relative position of each institution in three key areas. You can view the SQP Scores© for 98 institutions on the website www.interest.co.nz

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