Small finance companies likely to be forced out: KPMG

Accounting firm KPMG expects the drive towards greater regulation and the burden of meeting new requirements will drive smaller entities out of the sector, according to its 2009 Financial Institutions Performance Survey - Non-banks Review.

"We understand that a range of merger discussions are currently occurring across a number of entities in both the finance and savings sector. 2010 may well be the year where rationalisation occurs by way of consolidation," the firm said in its report.

It cites the mounting regulatory burden and compliance costs, the need to optimise credit ratings, diversify funding and building a sustainable model as the key factors behind its prediction.

This comes after the finance company sector posted a $549 million loss last year compared to a profit of $163 million in 2008 as gross impaired assets almost tripled to $962 million. Total assets fell 5.5% to $15.6 billion.