Non-bank Financial Institutions Performance Survey

FIPS Non-bank Financial Institutions Performance Survey ? Review of 2017

Higher NPAT

10.2% 1

growth in NPAT

Weaker net interest margins

2 40bps

reduction in NIM

6

Steady provisioning

1.67%

increase in provisions

Higher net interest income

4.6% 3

rise in net interest income

Greater write-offs

5 36.82%

increase in impairment expense

Strong lending growth

13.92%

growth in gross lending

4

Contents

2 The Survey 4 Sector ? Themes and Issues 14 Sector ?Timeline of events 16 New Zealand declares war on multinational financing arrangements 20 FSF: An interesting year ahead follows an interesting year just gone 22 Focus on peer-to-peer lending 26 Sector performance 33 Looking back at the sector 34 Analysis of annual results 38 IFRS 9 ? Road to compliance 40 Credit ratings 41 Ownership 42 Descriptions of the credit rating grades 43 Definitions 44 Endnotes 45 KPMG's Financial Services Team 46 Contact us

KPMG's Financial Services team provides focused and practical audit, tax and advisory services to the insurance, retail banking, corporate and investment banking, and investment management sectors.

Our professionals have an in-depth understanding of the key issues facing financial institutions.

Our team is led by senior partners with a wealth of client experience and relationships with many of the market players, regulators and leading industry bodies.

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The Survey

Welcome to Part One of the 2017 edition of the Financial Institutions Performance Survey.

Our survey of non-bank financial institutions captures the financial performance of entities with annual balance dates between 1 October 2016 and 30 September 2017. The threshold for inclusion in this year's survey has remained unchanged at total assets of $75 million in one of the last two years.

All information used to compile this survey is extracted from publicly available annual reports for each financial institution, except for a limited number of participants that provided us with audited financial statements that might not otherwise be publicly available.

The non-bank sector comprises a total of 25 survey participants this year following the inclusion of four new companies and the departure of EFN (New Zealand) Limited and Fisher & Paykel Finance Holdings Limited.

It was noted last year that the sale of Fisher & Paykel Finance Holdings Limited to Flexi Group (rebranded as Flexi Cards Limited) will have an impact going forward because of the effect of the unbundling, and, as a result, is no longer included in the survey. EFN (New Zealand) Limited has requested to be excluded from the survey this year after we welcomed them for the first time last year following the sale and disbanding of GE Capital.

Regarding the four new participants, we welcome Branded Financial Services (NZ) Limited, Christian Savings Incorporated, Turners Automotive Group and Geneva Finance Limited to this year's publication. We have included prior year figures for these entities in order to preserve consistency and comparability between reporting periods.

It should be noted that following the accounting restatements at Fuji Xerox Finance Limited, we have made an exception to our usual policy and have utilised the restated comparative figures in this year's publication so as to achieve better year-on-year consistency and comparability in the survey results.

The reader would do well to recall that the non-bank sector includes a diverse mix of credit unions, non-bank deposit takers (`NBDTs') and finance companies, with the latter operating in the motor vehicle, consumer, personal, commercial and mortgage sub-sectors.

We must acknowledge and thank the survey participants (CEOs and CFOs) for their continued and valuable contributions, which included making the time to meet with us and discuss the various developments taking place within the industry.

TABLE 1: MOVEMENTS Who's out

Non-banks: 25

-- EFN (New Zealand) Limited

-- Fisher and Paykel Finance Holdings Limited

Who's in

-- Branded Financial Services (NZ) Limited

-- Christian Savings Incorporated

-- Turners Automotive Group

-- Geneva Finance Limited

? 2017 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

FIPS 2017 | KPMG | 3

? 2017 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

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