Media release - 12 December 2012
- Finance company profits rise.
- Asset quality continues to improve.
- Amalgamations feature as competition and costs increase.
Finance companies have reported an overall profit increase of 14 % in KPMG’s latest FIPS non-banking survey (Financial Institutions Performance Survey non-banking). Improved asset quality and net interest margins also feature.
The recovery of the non-banking finance sector has seen business amalgamations continue to be a visible strategy of participants, as shown by:
- Heartland acquiring PGG Wrightson Finance Limited
- Manchester Unity Credit Union amalgamates with Credit Union Baywide
- Credit Union North amalgamates with First Credit Union.
Heartland’s performance, driven by the PGG Wrightson Finance acquisition and an improvement in asset quality, dominates the trends seen in the FIPS Savings Institution sector.
Participants in the survey are facing increasing competition for lending growth, with low interest rates offered by banks and kiwi households reducing debt levels.
Finance companies are also facing increased compliance costs from new and existing regulations.
Profit margins in the finance sector have improved as the reduction in the cost of funding leads to a positive impact on margins.
Both finance companies and savings institutions continue to reduce the level of impaired asset expenditure as the quality of their lending portfolios improve and delinquent legacy assets are exited. However a note of warning is sounded as legacy non-performing assets will still require careful management.