Non-bank firms’ profits take 8% hit

Profits in the non-banking sector fell by nearly 8 per cent to just shy of $300 million in the September year, driven largely by a rise in impairment provisions.

KPMG’s non-bank sector report has revealed some of the impact of Covid-19 on the sector which includes credit unions, non-bank deposit takers, building societies and finance companies.

John Kensington, head of banking and finance at KPMG, said while the financial impact had yet to be seen for those businesses with a December or March balance date it was a different story for those with a June or September financial year with a more severe impact from provisioning. “What we will see in the future is . . . difficult to forecast, but it is unlikely that the impact on the non-bank sector is over yet.”

Net profit after tax fell by $26 million to $299.6m. The main factor in the fall was a $48.06m rise in impaired asset expenses to $163.85m due to asset quality decreasing as a result of uncertainty.

Of the 25 companies covered by the report, 13 saw a rise in profits but only three of those had balance dates after the level 4 lockdown.

Twelve of the 25 saw falling net profits, with Ricoh reporting the largest drop of 82 per cent followed by First Credit Union, down 73.5 per cent.

Credit Union Baywide was the only company in the sector to make a loss which KPMG mainly attributed to the remaining costs of an amalgamation coming through its financials.

Toyota Finance had the biggest profit rise, up $5.32m to $25.75m, then First Mortgage Trust, rising $5.04m to $44.4m.

Profits among the finance companies seemed to have been hardest hit according to KPMG, although some of this was attributed to the timing of the financial results.

Total assets in the sector grew only 3.95 per cent which was low compared to growth of 12.2 per cent in 2017, 14.7 per cent in 2018 and 9.4 per cent in 2019.