By Gareth Vaughan
UDC Finance's new chief executive says the plant, equipment and vehicle lender whose TV advertisements say it has lots of money to lend, recorded lending growth of 10% in July with a pick up in the construction sector and car loans growing strongly.
"For July we hit double digits, just over 10%," Price said. "It was NZ$99 million. So we are seeing good solid growth in the market."
On top of this, UDC had recorded a 16% increase in car loan lending so far this year, which Price suggested points to improving consumer sentiment. Although across all industries lending growth was patchy, there was growth in construction and Christchurch.
"I think what we're seeing is there's some positive sentiment out there. We are getting growth but it seems to be shorter term so customers and clients are taking the decision when they know they've got the work or the contract," said Price. "So that indicates to me that they're still a little bit uncertain about the future and what that will bring."
Today UDC is one of only 10-12 finance companies with prospectuses open seeking debenture funding from the public, compared with more than 60 six years ago, following the demise of dozens of finance companies, many of whom lent money to property developers. See details of the failed companies in our Deep Freeze list here.
Price, who grew up in Wellington, joined UDC from ASB's parent Commonwealth Bank of Australia (CBA). However, she began her career at UDC in 1997 as a graduate and was mentored by David Hisco, now CEO of UDC's parent, ANZ New Zealand, but who was UDC CEO from 1998 to 2000.
"He (Hisco) was one of my mentors and sent me across to (ANZ's Australian vehicle finance company) Esanda where I really learnt car finance. I ate it for breakfast, lunch and dinner and that was something that was really good. Coming back he has said 'stick to the basics, look at assets and make sure that you know the industry you're in.' So he has been a great mentor of mine over the years."
At Esanda Price was national product manager and national communications manager. She also had spells at American Express and Saatchi & Saatchi, before joining CBA in Sydney. During eight years at CBA her roles included general manager of brand and advertising and leading the bank’s programme to promote its centenary.
In the six months to March UDC's profit after income tax more than doubled to NZ$18.7 million from NZ$9.1 million in the six months to March 31, 2011. The big increase came as net interest income rose NZ$8.7 million to almost NZ$43.4 million and provisions for credit impairment fell NZ$4.8 million to just under NZ$1.8 million. Operating expenses rose just NZ$470,000 to NZ$15.8 million. Price said UDC, which is the country's biggest finance company and has about 160 staff, has "fantastic" momentum.
"Lending growth is good, provisions are down to the lowest level since 2008, (and) our debenture book is performing really strongly," said Price. "Our debenture book's standing at just over NZ$1.55 billion at the moment which is a good place to be if you think our assets are at NZ$2 billion. We've got good coverage."
"It's New Zealanders investing their money with us and then we're investing that in New Zealand so New Zealanders are helping New Zealand grow."
Parent ANZ's general disclosure statement for the nine months to June 30, out yesterday, showed secured debenture stock up NZ$59 million, or 4%, in the three months to June to NZ$1.515 million. UDC shares its parent's AA- credit rating from Standard & Poor's. The financier offers secured term investments, capital draw-down term investments and telephone call accounts.See the interest rates offered by UDC on investments here.
Despite the demise of many finance companies in recent years and subsequent burning of "ma and pa" retail investors, Price said she was optimistic about the future of retail debenture funding.
"Absolutely. UDC has been doing it for over 74 years, it's part of the ANZ group, we've got a strong value proposition. Our debenture book's growing and it helps us fund the other part of our business so it's a good place to play for us," Price said.
Nonetheless, a NZ$800 million credit facility from ANZ, of which NZ$330 million was drawn down at June 15, was also "absolutely crucial" to UDC.
"Being part of ANZ group is a real asset to us. We can feed in, there's great expertise there, when we go to market as commercial and agri we can look at wholistic solutions for our customers. That credit line is important to and gives us cost of funding so we can top up as required so I think it's an important part of who we are."
UDC's main lending competition was coming from BNZ, Westpac and ASB's growing asset finance arm. Price said UDC has no plans to diversify away from lending for plant, vehicles and equipment.
This article was first published in our email for paid subscribers this morning. See here for more details and to subscribe.