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Non-bank sector booming

Advisers are increasingly beating a track to the doors of non-bank lenders who are benefitting from the tightening up of bank lending.

Thursday, December 14th 2017, 1:56PM

by Miriam Bell

KPMG head of banking and finance John Kensington

KPMG’s latest Non-Bank Financial Institutions Performance Survey reveals that the sector saw a 10.2% profit increase to $216.77 million in the year to 30 September 2017.

Non-bank lenders - which includes mortgage trusts, credit unions and finance companies – also saw a 13.92% growth in gross lending.

Within that, non-bank mortgage lending jumped up to $2.5 billion from $1.61 billion over the last year.

KPMG head of banking and finance John Kensington says that a key driver of the sector’s strong performance has been the slowdown in lending in the mainstream banking sector.

Banks have been lending more cautiously due to the LVR restrictions on mortgage lending and funding pressures from the higher regulatory capital requirements affecting the big four Australian-owned banks, he says.

“This has meant that most non-bank lenders have been able to capitalise on the flow of business the banks have said ‘no’ to that in the past they might have accepted.”

As a result, the KPMG report finds that credit quality in the sector is robust, with impairment losses and provisioning appearing to be close to cyclical lows in spite of the strong demand for loans.

But the availability of low cost funding appears to have reduced slightly in the sector.

Kensington says 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.

“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 report also notes that a few survey participants noted an increase in the presence of advisers in the market.

It says that advisers seem to be bringing an increasing number of borrowers to the door who have been declined by a previous lender.

A few of those advisers are charging fees that are high in comparison to the establishment fees that a non-bank would be permitted to charge under the Credit Contracts and Consumer Finance Act should the customer approach them directly, the report says.

Q Adviser Group head Geoff Bawden says this could be happening but he didn’t have anything to validate the claim.

“The potential is there for it to happen when the market contracts, as it has, because the market contraction opens up the opportunity for it.”

He says that he wouldn’t encourage his advisers to charge fees in the normal cause of events.

“But any adviser charging a fee needs to quantify the fee commercially and to mandate it in agreement and writing before doing any work. If they fail to do so, they are going into it at their own peril.”

Tags: banks KPMG Lending Q Group

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Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 3.95 4.49
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
BNZ - Classic - 3.55 3.45 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
HSBC Premier 5.24 3.35 3.35 3.35
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank 5.80 ▼4.14 ▲4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
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 - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - ▼3.55 3.39 3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
TSB Bank 6.09 4.35 4.25 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.55 3.45 3.89
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.55 3.45 3.99
Median 5.34 4.04 4.09 4.39

Last updated: 15 November 2019 4:16pm

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