FIPS Specialist Lenders: Review of 2024

For over 30 years, KPMG’s Financial Institutions Performance Survey (FIPS) reports have provided insights into New Zealand’s financial services sector. Each edition presents industry commentary and analysis on the performance of the sector, together with a range of topical articles from industry experts, regulators and our own business leaders.

Note: This year we have undertaken a rebranding of the survey from Non-Bank review to Specialist Lenders review, based on insights from our conversations with sector leaders.

Specialist Lender sector growth in 2024

New Zealand’s specialist lending (previously referred to as non-bank) sector has experienced another year of growth, with participants of KPMG's 2024 Financial Institutions Performance Survey (FIPS) for the sector experiencing a growth in total assets of 6.98% ($1.26b) to $19.35b.

FIPS: Financial Institutions Performance Survey

Specialist Lenders Review of 2024.

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Profitability challenges:

While overall the sentiment from the sector has been positive, profitability has again come under pressure, with KPMG’s survey reporting a combined 24.82% decrease in net profit after tax (NPAT) during 2024, decreasing NPAT to $243.02m. The observable decrease is largely attributable to the triple impact of increased cost of funding, increased opex and additional doubtful debt provision. Despite the widely experienced decrease, only 6 out of the 28 participants reported a loss for their financial reporting periods.

It will be interesting to see where profitability trends during the following financial year, and whether the specialist lenders sector can bounce back and restore profitability going forward. The answer to that question might well depend on two factors. 1) How they manage the falling interest rate cycle we now appear to be in; and 2) Where the New Zealand economy heads and when, if, and how quickly and how strongly it recovers . Will the much hoped for growth occur in HY2025 or will it be 2026?

John Kensington

Partner

KPMG New Zealand

Contributing factors to this year’s mixed results include:

Net interest income increased by 4.33% ($46.95m) to $1,132.29m (reflective of the increase in gross loan and funding books and elevated interest rates)gross loan books and interest rates rising)
Non-interest income increased 6.41% ($33.59m) to $557.23m
Net interest margin dopped by 24bps from 6.57% to 6.33%
Operating expenses increased 14.69% ($154.48m) to $1,206.21m
Impaired asset expense increased 12.41% ($17.27m) to $156.35m
Provisioning levels increased 6.26% ($16.91m) to $286.83m
Tax expense decreased by 15.54% ($14.31m) to $77.78m.