By Gareth Vaughan
GE Capital, New Zealand's biggest finance company, says it might borrow money from the public in the future but for now shouldn't be included in any rejigged Reserve Bank non-bank deposit taker regulatory regime because it's already "very heavily" regulated.
Greg White, GE Capital's chief operating officer for Australia and New Zealand told interest.co.nz the company, which is owned by US conglomerate General Electric, has considered taking deposits from the New Zealand public.
"We actually think that in fact might be a very good opportunity at some point in time," White said. "And if we do go down that track we would make that call in the context of whatever legislation the government had decided to put in place."
"Globally we've diversified our funding capability (and) from a competition and product set point of view it could be something that we could pursue over time. (But) it's certainly not on the agenda in the short-term," White added.
GE Capital NZ is currently funded through its parent.
'Very heavily regulated'
The Reserve Bank is currently reviewing its non-bank deposit taker (NBDT) regime.One of the issues under consideration is the very definition of a NBDT. The Reserve Bank is considering changing the definition of a NBDT to ensure it better catches entities likely to raise systemic risks in the NBDT sector, including through lending as well as borrowing.
A NBDT is currently defined as a person that offers debt securities to the New Zealand public, and carries on the business of borrowing and lending money, or providing financial services, or both. However, the third of three proposed definitions of NBDTs listed in a Reserve Bank consultation paper is; "Defining NBDTs as entities that carry on the business of borrowing and lending, and/or providing financial services, with greater use of statutory carve outs." This option makes no specific mention of whether to be a NBDT an entity must take deposits from the public or not.
White said GE Capital was already "very heavily regulated" in New Zealand
"Whether it's the Financial Markets Authority, the Fair Trading Act, the Credit Contracts and Consumer Finance Act and now the upcoming responsible lending regime. So I think there is a lot of local regulation. GE Capital is also already regulated by the US Federal Reserve. So we have local regulatory requirements and we also have global regulatory requirements on top of that."
"So we think as a responsible lending financial institution we are already very well regulated," said White (pictured).
Both the Fair Trading Act and the Credit Contracts and Consumer Finance Act are overseen by the Commerce Commission. And as a Qualifying Financial Entity it comes under the Financial Markets Authority's umbrella. GE Capital coughed up $60,000 to settle a Fair Trading Act breach in 2011.
White's comments came as GE Capital released selected financial information for the 2012 calendar year. This incorporates GE Finance & Insurance (GE Money), Custom Fleet, GE Commercial Finance NZ and GE Commercial Finance (USD) New Zealand.
Bottom line hit by sale of mortgage business
Kerry Conway, GE Capital's New Zealand acting managing director, said annual core profit from continuing operations was down $4 million, or 3%, to $145 million.However, net profit after tax was down $127 million to just $7 million due to a $138 million one-off charge following the sale of GE Capital's home loan business. In May 2011 GE Capital announced the sale of A$5.1 billion worth of Australasian home loans to Pepper Australia, a subsidiary of Singapore-based investment holding company Pepper Group, in a deal that included loans from the former Wizard Home Loans book and a total of A$800 million worth of mortgages in New Zealand.
Conway also said GE Capital's loans at least 30 days past due dropped by 50 basis points to 2.8% of its total loan book. Its cost to income ratio dropped to 54% from 56%. Impairments rose $3 million to $36 million. Net lending assets rose 2% to $2.411 billion. That makes it New Zealand's biggest finance company ahead of ANZ's subsidiary UDC Finance which has total assets of $2.1 billion.
Conway said there were now more than 100,000 holders of GE Capital's GEM Visa card, which launched in July 2011. It has a $55 establishment fee, a $55 annual account fee, and charges a 24.95% annual interest rate. Supermarket chain Countdown entered the credit card market in February through an alliance with GE Capital. White said so far this partnership had brought in just over 5,000 cardholders.
"Growth in that credit card space we think is going to be a huge opportunity," White said.
Meanwhile, Conway said the group's fleet management business had secured the Department of Building and Housing as a customer over the past year.
Conway is acting managing director after Aaron Baxter's departure to a GE Capital role in Australia earlier this year. White said a permanent replacement would be named in the short-term and that it wouldn't be Conway.
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