Profit at UDC, country's biggest finance company and ANZ subsidiary, jumps as provisions for credit impairment sink

Profit at UDC, country's biggest finance company and ANZ subsidiary, jumps as provisions for credit impairment sink

By Gareth Vaughan

UDC Finance, the ANZ owned asset finance provider for plant, equipment and vehicles, is again showing the fruits of being a survivor in the finance company sector with its annual profit jumping 59% as provisions for credit impairment tumbled.

UDC's profit after income tax for the year to September 30 rose NZ$10.732 million, or 59%, to NZ$28.901 million from NZ$18.169 million in the previous year. The company's provision for credit impairment collapsed to just NZ$4.891 million from NZ$17.343 million.

It's the second year running UDC has posted a big profit jump as provisions tumble. Last year's NZ$18.2 million profit was up from just NZ$2.7 million in the year to September 2009 as UDC's provision for credit impairments halved to NZ$17.3 million from NZ$35.5 million.

UDC has an NZ$800 million credit facility with ANZ and currently has drawn down NZ$350 million of this, up from NZ$225 million at its half-year balance date of March 31.

As of September 30, UDC had NZ$1.488 billion worth of secured debenture stock on issue, up about NZ$110 million from NZ$1.378 billion at March 31. Gross loans and advances at September 30 stood at NZ$2.251 billion, down about NZ$62 million from NZ$2.313 billion at March 31.

UDC's annual operating income fell NZ$1.740 million, or 2%, to NZ$77.558 million with net interest income down NZ$487,000 to NZ$76.786 million. Operating expenses fell NZ$3.110 million, or 9%, to NZ$31.176 million. Cash and cash equivalents dropped to NZ$57.532 million at year's end from NZ$161.588 million at March 31.

Meanwhile, past due loans and advances stood at NZ$55.660 million at September 30, down from NZ$127.644 million a year earlier leaving 2.47% of gross loans outstanding, less than half the 5.55% outstanding a year earlier. However, assets more than 90 days overdue rose by NZ$760,000 year-on-year to NZ$15.539 million.

UDC, which  is policed by the Reserve Bank's non-bank deposit taker rules, is chaired by independent director Stuart  McLauchlan, a Dunedin accountant and ex-South Canterbury Finance independent director. The country's biggest finance company has survived as many others collapsed over the past five years by steering clear of lending money to property developers, and continuing to finance plant, equipment and vehicles. Added to that is its funding support from ANZ and governance, risk management and liquidity risk forecasting in line with its parent's.

UDC's credit rating was recently cut to AA- from AA by Standard & Poor's mirroring the cut to its parent ANZ's rating.

UDC paid no dividends to ANZ in the year. It paid no dividends the previous year.

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