Non-bank sector says CCCFA will harm lockdown recovery

Companies trying to claw their way back into business after the lockdown will be further shackled by the CCCFA, a new survey has found.

Tuesday, December 14th 2021, 5:00AM

by Eric Frykberg

Many will be unable to get any loans at all to finance their recovery, and those who win approval will have to wait a lot longer for the cash to come through.

These are among the findings of the KPMG Non-bank Financial Institutions Performance Survey 2021, which looked at 26 companies, all of whom had to have assets of at least $75 million to qualify.

The Covid worries came out strongly in the survey, even though the non-bank lending sector was strong overall.

“Most sectors are seeing excellent credit quality,” said KPMG’s Head of Banking and Finance, John Kensington.

“Most survey participants said (the non-bank sector) is as strong as it has ever been.”

But access to that credit would be harder because of the new rules.

“Survey participants feared the CCCFA changes would necessitate a more cautious approach from lenders,” Kensington said.

“Some cited the possibility of as many as one in five loans being turned down, along with the time taken to approve loans increasing by 25% to 50%.”

Kensington said this raised the possibility of loans becoming harder to get when the lockdown recovery could make them more needed than ever.

In other results from the survey, non-bank lenders were able to manage a 3.24% overall increase in net profit after tax.

This success came despite lending volumes growing at the lowest rate since 2010.

The survey found the institutions' income from both net interest and non-interest sources declined markedly, by 8.27% and 10.86% respectively.

But there were compensations that helped to offset this. Average funding costs declined slightly and operating expenses fell 10%. The cost of impaired assets fell a whopping 34.14%.

All these conflicting trends averaged out to put the non-bank lenders in the black overall.

Kensington had praise for the leaders of these organisations.

“The sector…..has made tough decisions to streamline their businesses and eliminate unnecessary expenses, due uncertainty over what the future might hold,” Kensington said.

However he maintained his worry about some of their clients, who faced a considerable challenge in getting their businesses back up and running after being without foot traffic for over 100 days.

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