Finance firms court term-deposit savers
Finance companies say New Zealanders are shaking off their fears about the sector and are prepared to hand over their money again.
New Zealand investors were burnt a decade ago when, one after the other, finance companies collapsed. Between the middle of 2006 and the end of 2012, there were 67 failures.
Now, finance firm Liberty says it has passed $50 million in deposits from New Zealanders and has experienced 127 per cent growth since 2016.
‘‘Many property investors have reduced their portfolios and released capital in recent years. They want to put their money into a term deposit but they are unhappy with the rates at the big banks,’’ Liberty chief executive Mark Collins said.
He said Liberty would offer 4.55 per cent interest on a 12-month term deposit, compared with an average 3.36 per cent at the banks.
Regulations introduced after the global financial crisis should give those investors more confidence in the sector, he said.
Another provider, General Finance, was sold last year.
Brent King, managing director and shareholder of the new owner, General Capital, said it had experienced deposit growth of 30 per cent in that time.
‘‘People understand that wellrun finance companies survived the 2008 global financial crisis ... [and that they] were good businesses. The market understands the world has had secondtier lending – finance companies, investment banks – since biblical times or before,’’ he said.
‘‘The older investor understands any business can fail or at least have tough times because the world goes through economic cycles.’’
King said the sector should grow at a rate of 10 per cent a year over the next few years.
But non-banks are still a small part of the market. In 2007, New Zealanders had $12.3 billion with non-bank deposit takers such as finance companies, credit unions and building societies. That has since fallen to $2.85b, only slightly up from the lowest point of $2.75b.
David Tripe, head of Massey University’s school of economics and finance, said finance companies were likely to remain small players overall.