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Avanti gets good report card

Avanti Finance’s move towards residential loans and its strong broker support augur well for the company, a recent report says.

Tuesday, November 29th 2016, 12:58PM

Ratings agency S&P recently confirmed Avanti’s BB credit rating, reflecting the company's “very strong capitalisation levels and sound and defendable business model, underpinned by a well-articulated and executed strategy.”

“Avanti's business model is transitioning toward a higher proportion of residential mortgage loans within its business mix--a business line that we consider highly commoditised and competitive.”

S&P says there is “a lack of meaningful competition in the non-bank sector within Avanti's chosen target market and adopted points of distribution – third party distribution.”

It says Avanti has a long-standing and successful history with brokers which augurs well the company.

Avanti's business position strength is broadly in line with the industry average for non-bank financial companies in New Zealand.
S&P says Avanti is targeting first secured residential mortgages at close to 50% of stock during the next three years, up from 35% currently, with the remainder comprising a mix of motor vehicle loans, other consumer and property loans, and some small to medium-size enterprise loans.

“We also expect the finance company's operating revenue mix to shift toward a higher proportion of net interest income as a result of the forecast growth in residential mortgage lending (currently 65% of operating revenues), which we consider as having good recurring characteristics and forecast to increase toward 75% in the next three years.

“Growth forecasts are strong for the next three years, with compound annual growth at more than 30%.”

S&P notes Avaniti has received $7 million of new committed capital from existing and new shareholders to help fund growth.

It also says banks have been providing a good level of support. “To date, the finance company has had little trouble extending the support of its long-dated warehouse funding, and we currently foresee little risk of this changing in the next 12 months.”

Tags: Avanti S&P

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ANZ Special - 3.55 3.45 3.99
ASB Bank 5.20 4.05 3.95 4.39
ASB Bank Special - 3.55 3.45 3.89
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Credit Union Auckland 5.95 - - -
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Credit Union North 6.45 - - -
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Heartland Bank - Online - - - -
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HSBC Premier 5.24 3.35 3.35 3.35
HSBC Premier LVR > 80% - - - -
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HSBC Special - - - -
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Kiwibank Special - ▼3.39 ▲3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
RESIMAC Special - - - -
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SBS Bank Special - ▼3.55 3.39 3.89
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The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
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