Kiwi finance companies face more competition

Media Release – Tuesday 8 December 2015

Kiwi finance companies face more competition

Embargoed until 5am Thursday 10 December 2015

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.

Ends

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