KEY POINTS:
Two major finance companies posted strong results today, and one said regulation of the industry is inevitable.
South Canterbury Finance chief executive Lachie McLeod said his firm supported regulation and predicted the liquidity squeeze would force some companies to either merge or wind down their loan books over the next two to four months.
But he and chairman Allan Hubbard said consolidation did not mean mismanagement.
"These companies, many of which are well managed, simply do not have scale or diversity to obtain an investment grade credit rating," Mr McLeod said.
"The larger New Zealand finance companies that are able to maintain sound liquidity, an investment grade rating and have a sound credit culture, will be in a very strong position, going forward."
Mr Hubbard added his support, saying there had been "some exceptional finance companies in New Zealand, which are well run and will continue to play a large part in the business development of this country".
Property Finance went into receivership today, becoming the sixth finance company in 15 months to collapse and the second in just over a week.
South Canterbury posted a 29 per cent increase in net profit to $50.6 million, from $39.3 million last year, ahead of the $45 million it forecast.
Mr McLeod said South Canterbury had shored up its liquidity by securing a $150 million funding line with BNZ and CBA, in addition to $140 million cash in the bank.
It had a BBB- investment grade rating (stable) from Standard and Poors, and had seen debentures grow 18 per cent to $1.4 billion over the year. Total assets had increased 20 per cent in value to $1.635 billion.
Mr McLeod attributed South Canterbury's result to broad diversification between regional and segment investments, and employing experienced lenders.
Business and property lending had grown significantly, as had plant and equipment markets, while the consumer and rural markets were steady amid sector weakness.
The company has allocated $500,000 to charity as a way of marking its 80th year.
HANOVER STRESSES RATINGS
Another finance company, Hanover Finance, posted an audited net profit before tax of $60.6 million, up 5.8 per cent on last year's profit of $57.3 million.
Hanover Group's chief executive Sam Stubbs stressed the need for finance companies to have credible ratings.
"We have been very open in our belief that international credit ratings should be mandatory for all finance companies -- this would be one step that would help prevent the kind of turbulence evident in the finance sector today."
Mr Stubbs said his company's result had been been driven by a conservative strategy of maintaining a quality loan book and large cash reserves.
"In the past year we ran the business very conservatively, in view of what we felt was a high level of market exuberance," he said.
Hanover Finance has a BB+ international rating from Fitch.
Mr Stubbs said the loan book had a broad spread of property classes and shareholder funds were at record levels.
Subsidiary United Finance reported net profit before tax of $13.7m, up 108 per cent from $6.6m in 2006.
PAIR BUY INTO MORTGAGER
Also today, the owner of Avanti Finance and Think Finance said it had taken a one-third shareholding in Mortgage People Ltd, a mortgage brokerage, for an undisclosed sum.
Private investment company G&S Investments Ltd, which is owned by interests associated with Glenn Hawkins and Stephen Eltringham, said the move would broaden its management team.
G&S chief executive Glenn Hawkins predicted the broker sector would experience some interesting changes over the next few years as banks changed their commission levels.
- NZPA
