Survey predicts more care in lending

A KPMG survey of savings institutions suggests volatile housing prices over coming years could lead to more conservative lending policies.

The annual survey released yesterday covers nine savings institutions including PSIS, Southern Cross Building Society and Southland Building Society.

The buoyant residential property market and healthy farm incomes helped boost the nines' total assets by 13.5 per cent this year to about $3.4 billion. The growth was slightly down on last year's 15.3 per cent growth.

With their lending profiles dominated by the housing market, KPMG says demand for residential mortgage lending will continue to have a major influence on the savings institutions' growth.

But the potential for volatile housing prices over coming years could force savings institutions to adopt more conservative lending policies.

"In the midst of the current speculation surrounding the housing market, impressive growth levels witnessed in recent years could be set to stagnate in the near future," KPMG says.

Collectively, the institutions' net profit after tax rose 9.8 per cent to $28 million from $25.5 million last year. But last year's profit growth was higher at 35.3 per cent.

The sector's net interest income climbed $7.6 million, or 9.7 per cent, thanks to an 18.2 per cent rise in net loans and advances. Operating expenses rose by $7.4 million or 10.8 per cent.

The nine increased total full-time staff by 43 to 491.

Aggregate impaired asset expenses jumped 63 per cent to $3.9 million from $2.4 million. "Sizeable" increases in specific provisions taken by Southern Cross and Southland Building Society were the two main contributors.

But Southland's impaired assets stemmed from its finance subsidiary Finance Now rather than its savings business.