Allied Nationwides takes property loan hit; seeks loan from parent
31st Aug 09, 9:16am
Small business, rural and property financier Allied Nationwide Finance has reported a NZ$5.6 million loss for the year after booking a NZ$9.7 million loss for several property loans. Allied Nationwide, which took over Speirs Finance during the year, also said it was in talks to obtain a NZ$5 million 'credit support facility' from its parent Allied Farmers and was focused on strengthening its capital base. Allied Nationwide Finance said the result was also affected by integration costs from the Speirs acquisition and the relatively high costs of holding cash at the bank at low interest rates while paying higher interest rates for the same money to debenture investors. "The year was always going to be challenging given the recession and its impact on the finance sector," said Allied Nationwide CEO John Mallon. "We have experienced some decline in the performance of our property book which has resulted in increased provisioning as at 30 June. Our desire to retain surplus cash has also come at some cost given the interest rate environment," Mallon said. Group assets were NZ$360 million at 30 June 2009, including NZ$121 million held in Allied Nationwide's asset securitisation programme. Total assets increased from NZ$191 million a year ago, largely due to the Speirs addition. "The decision to retain surplus cash was deemed appropriate despite its impact on this year's profitability, as it has enabled Allied Nationwide to continue to support its business and rural customers through difficult times while at the same time meeting all its funding obligations," Mallon said. Allied Nationwide has around 65% of its loans as asset finance to small to medium businesses and about 15% in the property sector. Allied Nationwide said it was finalising negotiations with Allied Farmers over a NZ$5 million 'credit support facility' "The facility is to cover existing and any future impaired loans over the next two years," Allied Nationwide said. Allied Nationwide said its focus for the next 12 months would be on strengthening its capital base, meeting the RBNZ non-bank deposit taker regulations and obtaining a credit rating from Standard & Poors by November this year. Allied Nationwide said its NZ$250 million asset securitisation programme was recently extended for a further term and provided access to the wholesale markets for funding the Company's asset finance business. The programme has an A-1+ rating from Standard & Poors, the highest credit rating available for this type of wholesale funding. Allied Nationwide said it expected to return to profitability in the current year, "provided there is no further deterioration in the operating environment." Here are the full annual results below. FullAlliedNationwideResult0809 We welcome your comments and insight in the comments below. Please note anything we've missed or gotten wrong.