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Asset quality now big issue for fin coys

The collapse of Belgrave Finance this week alongside reports on Capital + Merchant and Lombard are likely to impact on reinvestment rates with other finance companies.

Friday, May 30th 2008, 7:15AM
In a panel session at the SiFA conference this week Strategic Finance chief executive Kerry Finnegan and St Laurence chief operating officer Peter Garty spoke about what was happening with finance companies in a panel session with Matthew Lancaster from Perpetual Trustees.

Garty said that reinvestment rates tend to "immediately drop" on the news of another collapse.

The key issue for finance companies now is not liquidity, but matching assets and liabilities. That is having a maturity profile of deposits which matches the terms of the loans made by the company.

Finnegan said that there is still a place for finance companies in the economy providing needed mezzanine finance to firms. He said companies like Strategic are still making good money and there are plenty of bankable deals.

Also he commented that companies like Strategic have done well to cope with the conditions especially when a good chunk of funds walk out the door.

"I challenge any bank to see quarter of their money walk out the door and survive without support from the Reserve Bank."

Lancaster said the companies which appeared to have the most difficulties are the mid-sized ones which are reliant on debenture funding.

The small companies put "their arms around all their investors and tell them how much they love them, and that tends to be pretty effective," he says.

The bigger ones have more diversified funding lines.

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AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
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CFML Loans 9.45 - - -
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China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
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Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
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Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
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ICBC 7.85 7.05 6.69 6.59
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Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
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Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
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SBS Bank Special - 7.14 6.49 6.35
SBS Construction lending for FHB - - - -
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Median 8.64 7.19 7.17 6.65

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