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How has the composition of NZ's top 10 non-bank financial institutions changed over the past decade and does this say anything about the economy?

Banking / news
How has the composition of NZ's top 10 non-bank financial institutions changed over the past decade and does this say anything about the economy?

This week's release of KPMG's annual Financial Institutions Performance Survey (FIPS) for non-bank financial institutions offers the opportunity to look at changes in the composition of the biggest such entities over the past decade and see what this says about the economy.

Ten years ago in 2011 the mass finance company meltdown that began in 2006 was still playing out. You can see the full extent of the carnage in our Deep Freeze List here. 

According to the 2011 FIPS, the biggest New Zealand non-bank financial institution by assets was GE Capital with $2.5 billion. Second was Heartland New Zealand, which was formed through the merger of Marac Finance, CBS Canterbury and Southern Cross Building Society in January 2011. Third was ANZ's UDC Finance, with PSIS fourth biggest and Toyota Finance fifth.

Looking at where those five are at now, GE Capital, which was part of US conglomerate General Electric, was broken up in 2015. Consumer finance business GE Money was sold to Värde Partners, private equity group KKR, and Deutsche Bank, becoming Latitude Financial Services. GE Capital's Australian and NZ commercial lending and leasing portfolios, equipment finance and fleet solutions businesses, were sold to Sankaty Advisors, an affiliate of US private equity group Bain Capital, becoming EFN (New Zealand).

Heartland, having acquired rural lender PGG Wrightson Finance, obtained banking registration from the Reserve Bank in December 2012. UDC Finance was last year bought by Japan's Shinsei Bank from ANZ for $794 million. PSIS obtained bank registration in October 2011, changing its name to The Co-operative Bank.

The rise of vehicle financiers 

By 2016 Toyota Finance was the country's second biggest non-bank financial institution with total assets of $1.069 billion, and is fourth biggest this year with total assets of $1.3 billion.

Five years ago UDC, which provides asset-based finance to businesses for purchasing plant, vehicles and equipment, held the number one spot with total assets of $2.665 billion.

With vehicle sales at record levels, the growing importance of vehicle financing to the non-bank financial institution sector was demonstrated in 2016 by six of the top 10 non-bank financial institutions by assets either being fully or significantly involved in vehicle financing. These were UDC, Toyota Finance, EFN, Motor Trade Finance, Mercedes-Benz Financial Services and BMW Financial Services.

Housing lending makes its presence felt

This year UDC remains the country's biggest non-bank financial institution, according to the latest FIPS. Over the past decade its total assets have grown by almost $1.5 billion to $3.465 billion.

However, this year's FIPS also demonstrates the rise and rise of housing. Avanti Finance comes in second biggest with total assets of $1.615 billion. According to CEO Mark Mountcastle, residential mortgages make up more than 50% of Avanti receivables. Avanti's key funding mechanism is a Residential Mortgage Backed Securities programme via a warehouse facility with Westpac. 

First Mortgage Trust, which invests client funds in contributory property loans, is fifth with total assets of $1.1 billion.

Latitude, whose businesses include buy now pay later service provider Genoapay, is third with $1.6 billion of assets. Toyota Finance is fourth biggest.

Others in the top 10 this year include FlexiGroup, which features the old Fisher & Paykel Finance and the Oxipay buy now pay later service. The seventh biggest non-bank financial institution is the Nelson Building Society. The FIPS data shows it has grown total assets by $652 million over the past decade to $948 million.

In this year's FIPS KPMG notes a hit to the profit of motor vehicle financiers with four of the nine reporting a reduction in net profit after tax being BMW Financial Services, John Deere Financial, Mercedes-Benz Financial Services and Motor Trade Finance. This, KPMG says, indicates that while Covid-19 has prevented New Zealanders from spending money overseas resulting in an increase in vehicle prices, lending has been limited by both lockdowns and borrowers using their savings rather than borrowing.

Top 10 2021 Total assets*    Top 10 2016 Total assets*   Top 10 2011 Total assets*
UDC Finance $3.465b   UDC Finance $2.665b   GE Capital $2.5b
Avanti Finance $1.615b   Toyota Finance $1.069b   Heartland NZ $2.2b
Latitude Financial $1.6b   EFN New Zealand $982m   UDC Finance $2.0b
Toyota Finance $1.3b   Fisher & Paykel Finance $786m   PSIS $1.448b
First Mortgage Trust $1.1b   Motor Trade Finance $596m   Toyota Finance $1.1b
FlexiGroup NZ $959m   Mercedes-Benz Financial Services $567m   Fisher & Paykel Finance $793m
Nelson Building Society $948m   Nelson Building Society $559m   PGG Wrightson Finance $519m
Motor Trade Finance $761m   Fuji Xerox $444m   Motor Trade Finance $405m
Turners Automotive Group $626m   BMW Financial Services $358m   Mercedes-Benz Financial Services $353m
Mercedes-Benz Financial Services $593m   First Mortgage Trust $354m   Nelson Building Society $296m

*Total asset figures are rounded for brevity.

*This article was first published in our email for paying subscribers early on Friday morning. See here for more details and how to subscribe.

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Never realized NZ banks were offloading the mortgage risk to non-bank financial institutions.  Wonder if they will be bailed out, GE was in the US.  Another mechanism to inflate the housing bubble.


That's always been the case. 


Liberty also used to use a Westpac warehouse facility. 


Good business to have an alternative if you're restricted by cccfa and every other rule. 


Unless you have 2-3 years of business financials or a salary you can't buy a house even though you can afford to buy a house. That's a lot of kiwis.