Loan rules boost non-bank sector

Banks taking a harder line on loans have boosted credit unions, finance companies and other nonbank lenders this year.

KPMG’s latest non-bank financial institutions performance survey shows a 10.2 per cent increase in net profit for the sector this year, to $216.67 million. Loans increased 13.92 per cent.

John Kensington, KPMG’s head of banking and finance, said an important driver had been slower lending from mainstream banks.

They had been operating with increased loan-to-value ratio (LVR) restrictions, which limit low-deposit lending, and had stopped recognising offshore income in their home loan repayment calculations.

The big four Australian-owned banks were also under funding pressure to hold more capital.

Banks had looked to increase local deposits to offset that pressure, he said, but fears of a ‘‘deposit war’’ had limited how hard they fought for customers’ savings.

They had to be cautious with the extent to which they sourced money from offshore. That left limiting new lending as the easiest way to boost their capital buffers.

‘‘They’ve said no to some customers,’’ Kensington said.

‘‘Some of those customers have filtered through to the second-tier banks … some of which said no again, so they’ve gone to a broker, who’s looked at where they’ve gone already and gone to the next layer of entities.

‘‘[Those lenders are] used to doing debt consolidation loans at $15,000 to $20,000 – if they get an offer of a $100,000, $200,000, $300,000 home loan, with mortgage security, that looks like a very good deal, much bigger than they would normally do.’’

The loans are charged at interest rates several percentage points higher than bank customers would pay.

Some of those customers might only stay with a non-bank lender for a couple of years, he said, while they sorted out a problem with their credit history or made other changes that would make them credit-worthy for the banks.

Kensington said young people opting not to buy a house were another boost for the sector. They might have been saving a deposit but had given up because house prices increased out of their reach.

Instead, they were opting to buy things such as a car, boat or jetski, and were taking loans to fund some of the purchase. home loan

Credit quality in the sector is robust, with impairment losses and provisioning appearing to be close to cyclical lows in spite of the generally strong demand for loans.

But Kensington said: ‘‘Many participants noted that the historic love affair with looking after the borrower may be over; it appears that the liquid cash of retail depositors will be the kingmaker as far as funding is concerned going forward.’’

The availability of low cost funding appeared to have reduced slightly in the sector, pushing interest rates up.

‘‘A competitive lending market seems to have reigned in the ability of non-bank lenders to pass on the funding rate increase to their customers. Margins seem to be pressed at both ends.’’

William Cairns, of non-bank lender General Finance, said things had returned to normal over the year. Until recently, banks had been too willing to write loans and second-tier lenders had to compete for business, he said.

‘‘It was very hard for secondtier lenders but now there’s some rationality in the market.’’

He said there was a class of loans that should be done by banks. ‘‘I’m not arguing that but there’s a smaller group that banks shouldn’t be doing.’’

Cricket app sold

Troubled cricket scoring company CricHQ has been sold to a group of New Zealand investors. Receivers Neale Jackson and Brendon Gibson, of KordaMentha, confirmed the sale of the business and assets yesterday. They would not say who the investors were or how much they paid. The Wellington-based firm appeared to be taking the cricketing world by storm before its collapse earlier this year. Jackson said the sale of the business would ‘‘provide certainty for CricHQ’s customers around the world’’. The sale is due to settle in January, and includes the CricHQ platform as well as its global partner services, My Action Replay and Total Cricket Scorer.

Pipeline leak probe

The Government has announced an inquiry into the pipeline outage that threatened fuel supplies into Auckland. The 170-kilometre pipeline, which connects the refinery at Marsden Point to Auckland, carrying almost all of the city’s fuel, was shut down for 10 days following a leak discovered on September 14. Energy Minister Megan Woods said the inquiry would look into how to make New Zealand’s fuel supply more secure. She said the terms of reference will be issued early in 2018, but in the meantime officials would investigate short-term ways to improve resilience ‘‘as well as to ensure all parties involved have effective response plans in place’’ in the event of another outage.

Nib, Fairfax team up

A new health insurance scheme will target the 70 per cent of Kiwis who have no health cover. Fairfax New Zealand, the owner of news website Stuff, and nib, New Zealand’s secondbiggest health insurer, have joined to launch Done, an online-only product with quoting tools for customers to decide which cover they want. ‘‘We believe there is a real opportunity for private health insurance to help reduce the ever-increasing health cost burden on the Government,’’ nib chief executive Rob Hennin said. Done offers Everyday Cover and Hospital Cover and nib will act as the underwriter. The partnership follows others for Fairfax including Stuff Fibre, Energyclubnz and Stuff Pix.