2023 results for the non-bank sector

Despite challenging economic circumstances, the non-bank sector has continued to grow in 2023. Participants of KPMG's Financial Institutions Performance Survey (FIPS) for the non-bank sector have reported a combined increase in loan books (gross loans and advances) of 9.59% ($1.62 billion), and a growth of total assets across the sector of 8.14% ($1.66 billion).

Margins however have come under pressure, with KPMG’s survey reporting a combined decrease in net profit after tax (NPAT) 27.10% ($10.84 million) over the year to a total of $ 298.16 million. This is largely due to the increased cost of funding seen across the non-bank sector. Despite the widely experienced decrease, only 4 out of the 28 participants reported a loss for their financial reporting periods.

Contributing factors to this year’s mixed results include:

• Net interest income increased by $113.68 million to $1,355 million (reflective of the increased gross loan books and interest rates rising)
• Non-interest income decreased 9.88% ($51.29 million) to $570.47 million
• Operating expenses increased 15.37% ($168.61 million) to $1,266 million
• Impaired asset expense increased 129.30% ($157.64 million) to $279.56 million
• Tax expense decreased by 38.07% ($48.74 million) to $79.29 million.

“It has been a tough year for the non-bank sector, but those we spoke to are confident that there remains a real need for their services and products, and the results show this. The sector will need to ensure they are adjusting their businesses as needed, in order to continue to navigate and operate in the year ahead, where uncertainty looks to be the only certainty,” says John Kensington, KPMG Partner.

A key challenge for the non-bank sector is the lack of recognition of the role they play in the wider financial services market. When speaking with the sector, KPMG heard the importance of addressing the misconceptions, particularly with the regulators and some prospective customers.

“The non-bank sector has 1.7 million customers and is providing critical financing for valid credit needs. They provide important lending to a range of people, businesses, and industries through a range of products that currently banks simply do not, and likely will not provide for various reasons.”