By Gareth Vaughan
ANZ New Zealand CEO David Hisco says his bank is prepared to lend money to what he terms "reasonable" commercial property development projects.
His comments, after ANZ announced it has set aside NZ$3 billion, on top of the NZ$3.5 billion it expects to lend to refinance existing customers, to loan to small and medium-sized businesses during 2011 (see full story here), come in the wake of the recent demise of yet another property financier.
Equitable Mortgages was placed in receivership late last month with the company's CEO, Peter Thomas, predicting the property sector could remain in the doldrums for up to another five years. The demise of Equitable means all 10 property development and commercial finance companies with total assets of at least NZ$50 million covered in KPMG's annual Financial Institutions Performance Survey last year have now fallen over.
Hisco told interest.co.nz that in the case of some failed property financiers "in hindsight you could see that they would fail."
That said, ANZ was open to lending to property developers where deals stacked up.
"For reasonable property deals, if it’s a development where there are pre-sales and there’s equity and the people have got experience, they’re the sorts of things we’ll still look at," Hisco said.
"We actually have got money for those deals."
Hisco said that with the demise of so many finance companies in recent years the "access point" for customers had changed.
"There have been about 60 finance companies that have gone broke and yet you look at (the ANZ owned) UDC. We probably lent NZ$1 billion last year and we hope to do NZ$1.5 billion this year at UDC."
Hisco was UDC's managing director between 1998 and 2000. UDC doesn't finance property development. It lends on plant, equipment and vehicles. UDC was "taking up the slack" in terms of funding equipment finance and auto finance, he said. UDC competes with Marac Finance, which plans to apply to the Reserve Bank for a banking licence as part of the new 'Heartland Bank' group and has pulled out of property development lending.
'Open for business'
Meanwhile, Hisco said the point of announcing that ANZ had NZ$3 billion available for lending to small and medium sized businesses was to get the message across that the country's biggest bank was "well and truly" open for business.
"I think sometimes people like to talk about the fact that it’s hard to get money from banks," said Hisco. "But the clear message here is that the doors are open for business for viable propositions. We’re happy to look at them and we’ve got the money to lend."
Despite its total gross loans and advances falling to NZ$97.316 billion at September 30, down NZ$968 million from NZ$98.284 billion two years earlier, Hisco said the bank had kept "the doors open for businesses the whole way through" the global financial crisis.
Coming out of the global financial crisis ANZ had "reviewed" some lending criteria.
"One would be the above 80% loan to valuation ratio. We’ve loosened a little on that," he said.
"We don’t like going over 90%, we’re just not sure that’s the best way to go in terms of responsible lending. But over 80% (for business loans and residential mortgages) on a case by case basis, we’ll have a look at it."
Asked if he was confident of achieving good uptake on the NZ$3 billion worth of loans available to small and medium sized businesses, Hisco said he was.
"I think there’s some good reasons to be optimistic about the economy. Next year we have got a couple of things coming our way which are somewhat one off but both will help. One is the Rugby World Cup and the tourism associated with that and the other one is the Canterbury rebuild," said Hisco.
"Even though the (September 4) earthquake has been an unfortunate event, there is work to be done to restore (Canterbury) and we’re already seeing changes in the patterns of our customers that are associated with that."
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