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ASB creates NZ$1 bln “Job Creation” fund for business loans at 5% (Updated)
February 24th, 2009ASB said late on Tuesday it would launch a NZ$1 billion Job Creation fund aimed at lending up to NZ$10 million each to small to medium businesses with an interest rate of 5%. ASB also said it would offer special 2 year Job Creation term deposits offering 5%, meaning ASB stood to lose around NZ$30 million in lost margins (of around 300 basis points) if the fund was fully lent. (Updated to include interview with ASB executive, details on lost profits.)
The fund was aimed at businesses borrowing new money for projects that would create jobs and has been launched ahead of Prime Minister John Key’s job summit on Friday. The loans are also designed to help businesses avoid cutting jobs, ASB said. The fund would not be used to refinance existing loans, ASB added.
“If a business is prepared to invest in its future, and create or protect employment, then ASB is saying it is prepared to back them with an attractive lending rate,” ASB’s new CEO Charles Pink said in a statement.
The fund was not dependent on ASB raising a matching amount through the term deposits, said ASB’s Head of Relationship Banking and Financial Services James Mitchell.
“There are businesses with good plans and good ideas that need the impetus, given what we’ve seen with business and consumer confidence,” Mitchell told interest.co.nz in an interview.
ASB’s market share of business banking stands at around 8-9%, well below its market share for mortgages at around 22%. ASB’s business loans of about NZ$20 billion make up about third of its NZ$59 billion loan book.
The idea for a Job Creation fund had surfaced and been developed as Prime Minister John Key proposed the Jobs Summit and had spoken to bank CEOs about how banks could help soften the recession’s blow to employment.
Mitchell said ASB wanted to make it clear with its 5% interest rate on both the loans and term deposits that it would only be breaking even with the initiative. This also did not include any accounting for possible bad loans, he said.
“We are making that transparent and telling people that we’re not clipping the ticket,” he said.
ANZ National has announced it has NZ$4 billion to lend to small to medium enterprises. Westpac and BNZ have yet to announce any type of business lending or job creation initiative.
Tags: ANZ National, ASB, business banking stands, Business lending, Charles Pink, James Mitchell, Job Summit, John Key, new zealand, NZD, Profit margins, Reorganization
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February 24th, 2009 at 9:17 pm
why would they do this? I am not a bright man, so can not understand this.
February 24th, 2009 at 9:30 pm
Lot of small business owners are already borrowing funds mortgaging their houses. The huge differential between home mortgages abnd business lending rates forced many businesses to hold over valued housing assets to get credit relatively cheaply. A further drop in the business activity will see more housing assets liquidated… ASB’s efforts may help a few but not a lot. A good gesture though. Hope this sort of lending does not end up just a gimmick…
February 24th, 2009 at 10:44 pm
Interesting… this’ll help their case when the time comes to go begging to the government for a bailout. “You know how we were giving a helping hand to hard-working New Zealanders, like you wanted us to? Well, it kinda caused a bit of a problem…”
February 24th, 2009 at 11:45 pm
Government bail out? Hahaha. It is more like buying insurance from the captain of Titanic ship. USD is still the dominant currency of trade, and hence they can “bail” out their banks to some extend. Our government can print money to bail out banks but NZD cant keep its value even proportionately against other currencies. Our excessive debt will take its revenge for years to come.
February 25th, 2009 at 12:00 am
This is awesome news, good on ASB its in their best interest to help the nz economy hopefully other banks will follow suit, this is excatly the sort of thing we need.
February 25th, 2009 at 6:20 am
Miguel is on to something. The $1b ASB Trust fund has lost almost half its value. They raised mortgage rates last week. This is a cash-strapped bank burdened with toxic assets that cannot be sold for fear it will reveal the extent of their exposure.
This loan fund is good public relations and certainly has some other core motivation behind it, other than altruism.
February 25th, 2009 at 10:34 am
Smart move. This will cost them nothing, but give them a lot of goodwill.
I wonder if others will follow.
February 25th, 2009 at 10:52 am
I see it more this way.
Money has been lost, gone, is no more.
The govt wishes to replace it. It does this by lending,but borrowed money is not the same it has an interest component that cannot be serviced,its very different. It wont help replace the millions that has been lost. The credit crunch rolls on. The Govt can create credit but my thinking is this is very different to the money that has been lost.
Is my thinking flawed?
February 25th, 2009 at 11:00 am
other than butt kissing I can not see why they are doing this? If I went to ASB and asked for some charity I am pretty sure I would be told to go somewhere unpleasant. In fact as anyone gone to ASB and asked for some charity/breaking mortgages/application for loans recently?
February 25th, 2009 at 11:11 am
Paul – “In fact has anyone gone to ASB and asked for some charity/breaking mortgages/application for loans recently?” – yes & despite only being 30% financed they weren’t interested! Never mind, their competition approved it. ASB have been good to us over the years, but we’ve always found it seems to swing between one bank being helpful then the other. ASB seem to be ridiculously tight at the moment though, anything to do with their parent bank CBA I wonder?
February 25th, 2009 at 11:30 am
hm… more smoke and more mirrors if you ask me!
February 25th, 2009 at 11:35 am
Well they better get ready to put in rather more cash than that. The flow of job losses is turning into something of a flood judging by announcements in today’s press:
Recession sinks luxury boat firm (40 jobs to go it seems):
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10558502
Kitchen firm in liquidation (60 plus jobs under the hammer):
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10558497
1 in 5 used car shops go (supposidly 10,000 jobs gone in 6 months):
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10558496
Manufacturer closes, 97 jobs to go:
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10558536
Iconic fashion shops closing (10-15 jobs to go):
http://www.nbr.co.nz/article/gutted-keith-matheson-closes-doors-61270
(the latter is fire related, though I think they have wisely decided to take the insurance money and call it quits)
February 25th, 2009 at 11:36 am
Paul – has anyone gone to ASB and asked for some charity/breaking mortgages/application for loans recently? No, but we are with Bank Direct (a subsidiary of ASB) and in the past whenever we have made substantial on-off deposits to our savings account – we could bet that within the same day the money hit the account, we’d get a ring from the bank asking us what plans we had for the investment.
Just made one recently and haven’t heard from them yet – which is odd. Perhaps they don’t want to encourage savers into Term Deposits? Or, perhaps they’ve reduced the number of telemarketers? Most interesting.
February 25th, 2009 at 1:08 pm
Andrewj
No doubt yourself and Andy H will find some reason to tell me the following article is irrelevant and your doom and gloom theories are alive and kicking and only pathetic people disagree etc etc.
http://www.agridata.co.nz/blog/2009/02/24/uk-irish-famers-flocking-to-nz/#more-801
But as i pointed out a while back currencies and economies are a relative thing.
February 25th, 2009 at 1:31 pm
NZ-UK .35 hmm they have always been coming over. I dare say the banks are paying the airfares. I have contacts high up in several real estate firms and they say its very quite at present. Its one thing to look another to actually buy. If enough come over then perhaps we should be heading to the UK to buy land. Prices in the UK are way back, Browns tweaking of the way land is taxed took the cream off the top. I think foreign ownership of much of NZ rural inc is on the cards. I think the problem then, is that its Kiwis who are being pushed out of the dream to own land. I think if our $ collapses then overseas ownership would be a hot potatoe. Problem is returns from rural NZ are not that much worse than for the last decade. Its not about income its about Debt. So if UK farmers come and buy out a farmer and hes pays of his debt, that’s one way of reducing debt. I have read that land sales in the UK have got very sticky. I still dont understand why you would buy here instead of France except the French dont play Cricket.
Farming is about the $50 billion of debt, the billions tied up in equity partnerships and its basically unserviceable. A friend works at BP she said its getting embarrassing when the Wrightson fuel card is declined and its happening.
As I say best way to find out is give it ago however if interest rates climb you had better have a strong back. I just got some more Ammo for my Vineyard up %30 bollard better be careful or he will have a crisis on his hands. I think that being honest farm returns are better in Aussie but you have to live there!
February 25th, 2009 at 1:51 pm
Are negative comments about ASB allowed on Interest.co.nz?
This is a PR stunt to increase market share
February 25th, 2009 at 2:24 pm
Chris,
We’re an open site and our advertising relationship with ASB (who sponsor our videos) does not affect our editorial stance. As long as it isn’t defamatory, abusive or illegal we will allow any comments.
But one point worth making.
This is stunt that will cost NZ$30 million in lost profit. That’s quite some stunt. The most expensive stunt in the history of stunts in New Zealand. Perhaps only the stunts on Peter Jackson’s films have cost more.
cheers
Bernard
February 25th, 2009 at 2:47 pm
Andrew said “I think that being honest farm returns are better in Aussie but you have to live there!”
Because in Oz you pay CAPITAL GAINS TAX, the value of the income (cashflow) is more important than the aprecciation af the asset (farm). As cashflow is more important than future capital gains its value is more alligned to the cashflow it produces and much less about its future capital gain (or not).
Banks in NZ lend to farms mostly so that they can cashflow an operation to benefit from future capital gains (profit is secondary). This is the NZ “sub-prime” equvilent, yet to be realised by nervous rural lenders.
On ASB, in six moths they will be asking the govt. for assistance as they have, “over $1b directly invested in NZ jobs, and disruptions to the bank or its lending will jepardise these jobs – help!”
Shareholders must be going WTF?
February 25th, 2009 at 4:10 pm
ASB has a lot of small business as customers…if these go belly up, the ASB will have some big right offs….
there are quite a few stable small business out there who who have been caught with their pants down.
But IF the business is in reasonable shape, reasonable enough it can show putting on more staff, the ASB is then not going to have to right off it going under…
Good business move by ASB…and good PR to boot.
There are many areas where small business are doing quite well…eg the local general automobile repair/service shop with long term customer base, long term experienced and qualified staff.
The big franchise shops with larger charge out rates, will not be able to compete as well. National fleet gets older, more maintance… need WoFs etc.
Neville mentioned a few days ago about GB in 1930s recovered because of small busniness…maybe ASB picked up on the paragraph?
February 25th, 2009 at 4:16 pm
Steve L
I agree with you. I think Im correct in this. Aussie farm debt is about the same as ours.
Average farm mortgage runs for 7 years. Aussie ag must be 50x the size of NZ ag. This is a major advantage in dairy, around %50 of their milk goes fresh this creates a stable price platform. Friend purchased a dairy farm in Aussie 6k an acre. I say roll out the capital gains tax and knock some sense in NZ. The cost to the country of the latest asset boom fiasco is going to be enormous to stop it ever happening again -capital gains tax. As soon as the enormity of the problem becomes inevitable to all, we will get a Capital tax.
February 25th, 2009 at 4:28 pm
To reply to Andrew
This is the type of crap real estate agents have been getting away with for years.
“British and Irish farmers are quietly buying up NZ farms, according to a real estate agent who mounted a series of seminars in the United Kingdom late last year reports The ODT. “Many of the Irish and some of the UK farmers generate their incomes in euros – a currency which has gained substantially in the NZ dollar (exchange) cross rate over the past few years … making our farms very attractive,” Richard Graham said. A $1 million farm cost 563,000 euros to buy in 2006, but now costs about 405,000 euros, said Mr Graham: “That’s a substantial discount”.
He said 10 UK farmers have been inspecting properties in Nelson, Wairarapa, Canterbury and South Canterbury, and more would arrive in New Zealand over the next month. The British promotion attracted about 100 farmers, and for some of them the next step had been visiting NZ to take a first-hand look at both the farms and the local lifestyle.
British farmers earn Euros???? 10 farmers , they wont even touch the sales in Mangaweka.
if I have to start getting my information from a real estate agent them my world has ended. A 1 million $ farm is the size of a handkerchief, I know of dairy farms with over $50 million of debt the farmer wants some equity out they may sell for $75m thats what 30 million Euros. Anyone with the brains to make that sort of money isn’t going to waste it on a NZ dairy farm.
the truth is this is whats happening to UK property
http://www.telegraph.co.uk/finance/economics/4800418/Property-freeze-is-worst-since-1950s.html
and the future of the Euro is ???
http://www.telegraph.co.uk/finance/economics/4800828/German-CDS-debt-spreads-hit-record-as-economy-crumbles.html
Andrew you should think about a career in politics you are very good at spin. They to hide from reality amongst a whole lot of dubious statistics.
February 25th, 2009 at 5:28 pm
Andrewj
The UK is the biggest trading partner of the Eurozone according to Trichet so it would be surprising if some farms are not earning in euros. I noticed here by the way that cheese prices for fancy cheeses range from 19 to 34 euro a kilo and not the 25 i mentioned. Curiously salmon is 8.3 and porterhouse 34 a kilo. Good chicken legs and breast in a sauce are only 1.29 a kilo. it is strange pricing. I noticed a while back that the price of fish and mussels is rising rapidly in the ANZ commodity price index. Those NZ farmers look to do well out of that.
I dont think many NZers realise the attractiveness of living in NZ compared to the UK for many UKers. For many people NZ seems like a dream life. You yourself realise that for you it is like a dream life. Property in NZ is relatively cheap now and i would reckon the exchange rate will head back in the other direction at some point not so far in the future.
NZ could easily do quite well out of this mess one way or another.
One thing about the euro is that each country prints its own euros. German are X and Finnish L serial numbers. So if it breaks down we get to keep our euros maybe and reject the mickey mouse ones. Unusually I notice i have 3 Italian 50’s
most here seem in the past to be Finnish or German – something to keep an eye on i think.
February 25th, 2009 at 5:33 pm
Andy Hamilton, I will add Skellerup plant in Chch this week closing another belt. this is not yet out in the news media.
February 25th, 2009 at 5:41 pm
Andrew
I suspect Finland is living in cuckoo land sorry to break the news to you.
Ive been to a lot of farm sales over the years. Overseas investors are very wary they are just too easy a target for real estate agents,and their bag of tricks. Every sale to a foreigner has some idiot NZ farmer with a letter of credit from bank who doesn’t know when to leave his hands in his pocket driving the poor Pom through the roof. then the auctioneer gets a few bids from the either and whammo he owns a farm he knows nothing about. All I can say is Kiwi farmers set the price and have continued to do so. Every sale has an under bidder.the buyers curse you think the farm is worth more than anyone else in the room, maybe they are right! I havnt noticed any drop in farm prices just no sales.No sales because the banks cannot recover their investment,its just a matter of time.
February 25th, 2009 at 7:34 pm
the ASB was an aggressive late entrant into funding the dairy farm bubble.
it was almost as if they thought that they were being left behind and they jumped on the gravy train. The problem is that they caught the late train and look like they funded a lot of farms and conversions on a $6 payout. the train may have something brown in it but it sure isnt gravy.
This ASB $1b loan fund is just a great publicity stunt. The only way anyone can get a loan at the moment is to prove that they dont need it.
we are watching financial history develop, and the best part is that all the experts and economists have no idea about what exactly is going to happen and where we will end up.
February 25th, 2009 at 7:50 pm
“we are watching financial history develop, and the best part is that all the experts and economists have no idea about what exactly is going to happen and where we will end up.”
I agree allenh. hayek’s free market ideology has been uncontestable for two decades, but now an ideological window of opportunity is opening, which I am excited to see in my lifetime.
February 25th, 2009 at 8:33 pm
Andrew
Nice to see a fellow optimist……a large house/lifestyle property just down the road went to mortgagee auction last week sold for 2m (GV 2 point something) to I understand a foreign buyer who thought he got a bargain.
February 25th, 2009 at 9:53 pm
Optimists? Aren’t they the folk who wander out to see all the pretty fish flapping about on the newly exposed sand when the sea suddenly disappears over the horizon? My, my, what an opportunity to study some colourful marine organisms without getting your feet wet…….
February 26th, 2009 at 12:16 am
Andrewj
The banks investments have been agreed to be transferable to the RBNZ it is proves to be necessary. So the banks dont have to worry too much. I see Norway arranged a eurodashi the other day. And i noticed a while back the nordic countries were behind the USD swap arrangement for aus and nz – something like that happened back in september or october. Given the Japanese news i would guess that a wall of money will find its way to NZ at some point. And I would guess based on my life experiences that the nordic countries are happy to support NZ in return for guarantees of food etc etc. Norway unusually has a 100 year investment horizon for its massive pension fund. I just dont see the worries you have for the reasons you worry about. NZD LIBOR is just over 3.5% for overnight and just over 4% for one year. You talked about the need for NZ banks to borrow USD at 9.5%. Maybe you have the details on that so i can check it out?
There seem many people trying to spin this crisis to be more than it is so far from the point of view of NZ. Who are they? Gold investors? Hedge funds? The bailout crowd?
You may think i live in cloud cuckoo land. I remind you again that you told me that garden shears wont save Finland as if you knew the future of Finland and yet knew nothing of Finland. All i know is that dispite the difficulties some firms are having in Finland that other firms are so far reporting they are managing their way thru what they regard as a cyclical downturn that they were in some way prepared for. Kone for example has no debt.
The only way you are going to get your desired doom and gloom outcome is if war comes. People will meanwhile continue to eat and drink and NZ will play its part ensuring they can do so.
China said before christmas that it expects excess inventories to be worked off by around April. That seems to be playing out. Chinese problems seem to mainly oriented towards toy and light industrial and better in heavy industrial which supports the feedback of the Finnish companies making very heavy industrial stuff. The Baltic dry index continues to consolidate around 2006 levels. Nordea who support shipping finance said earlier they only invest in the best firms and just see a cyclical downturn and will support all customers.
It pisses me off you talk about me spinning. I have always said what i talk about is testable. It is working out so far. What you talked about is also working out. I have been following this crisis for years now. It is of course a tremendous worry.
Either way things are not so bad so far.
February 26th, 2009 at 12:18 am
Nick,
I assume you are refering to a Havelock North sale?
That property was originaly expecting to accive $3-4m in 2007
Here is the speel from …….
“The statistics are still saying the numbers are low but the reality is they are reporting on a market from one to two months ago – outdated.
The market is changing constantly and those on the street see the changes quickly. The Hawke’s Bay real estate market is seeing volume of sales return and believe it or not, this is the first sign of a good recovery.
Most of those who follow real estate will be aware of our very successful day last Friday at CinemaGold with our first “Hot Auction” event. We put six homes under the hammer, had good bidding on all six, sold three on the day and have strong interest in two of the others.
Now these homes have been on the market for only four to five weeks, so this represents a great way to sell property when the average days to sell is longer than 3 months.”
It goes on, however no mention that two of the three sales where mortgagee sales, some of these homes have been on the market for years….
For a major industry player its not very credible.
For Joe Average vendor it was just the good news they had hoping for.”a good recovery”
February 26th, 2009 at 2:43 am
Funny how an agent can say:
“The Hawke’s Bay real estate market is seeing volume of sales return and believe it or not, this is the first sign of a good recovery.”
And even so somebody wants to spin it to minimise the influence the agents comments might make in the market.
After all according to most of the posters on this board there is only one future reality possible and that is there own one. Everybody else must be lying to promote an agenda. And so it endless goes on. If you can sucessfully spin it you might all achieve your revolutionary objectives.
Meanwhile objectivity and honesty are inconviences that nobody needs. After all it does not matter when you know what the future is and you are on the side of what is good and right and proper and what will best suit your own agenda.
Integrity is evidently an unfashionable quality these days.
February 26th, 2009 at 8:25 am
Ive a friend in HB, he employers 24 people,I believe he now has enough work for 1. Orders have dropped of a cliff.
This news from Japan is a warning to us of the risk to our Euodashi dependence.
http://www.telegraph.co.uk/finance/financetopics/recession/4807231/Japans-exports-collapse-as-crisis-deepens-in-Asia.html