FMT has highest return for the fund since 2008
Alternative lender and fund manager First Mortgage Trust (FMT) is confident in its future despite a challenging economic environment, according to CEO Paul Bendall (pictured above).
FMT pointed to its recent performance and the growing non-bank lending sector as evidence of its resilience and future potential.
“There is no doubt that the economy still has challenges ahead, especially while interest rates remain elevated,” said Bendall.
“Every economic cycle presents opportunities, and we are well placed to take advantage of these.”
Economic environment and fund resilience
Rest assured; Bendall isn’t under any illusions. From rising mortgage arrears, dwindling savings, and weakening economic indicators, it’s a tough environment to operate a lending business.
Bendall said the current economic climate presents significant challenges, with high living costs and persistent inflation affecting many of us.
“While we remain optimistic about the future, we understand the importance of stability during these times,” he said.
“Our fund has continued to perform well, providing consistent and reliable investment returns amid the volatility seen in other asset classes.”
As a conservative fund dedicated to wealth protection, Bendall said it is committed to safeguarding investments and offering reassurance and confidence during uncertain times.
This has been evidenced in the performance of FMT’s loan book. As of May 31, FMT’s overall loan arrears remain low, and non-performing loans sit at 0.73%.
“For context, the nonperforming loans at 90 days for the main four trading banks, at the end of March 2024, range between 0.5% and 0.8%, so we are comfortably within this risk profile.”
Additionally, FMT’s fund consistently delivers higher returns compared to major bank term deposits and other on-call savings accounts.
“Over the past few months, we’ve observed a gradual decline in one-year term deposit rates, with the current average 12-month term deposit rate at major banks being 5.90%,” Bendall said.
In comparison, FMT’s fund achieved annualised pre-tax return of 7.43% over the last quarter – the highest return for the fund since 2008.
“This result has been achieved through an increase in our lending volumes and an overall increase in our average interest rate as older loans originated at lower levels have been repaid,” said Bendall.
Alternative lending industry to grow
While FMT may be optimistic given its strong investment position, it comes at an uncertain time in the industry.
On July 1, prominent non-bank Resimac exited the home loan space, citing that the competitive environment will remain restrictive for non-banks for the foreseeable future.
Despite the tough environment, Bendall could see more upside in the near-term for non-banks.
“Globally, the non-bank industry has grown significantly over recent years, and we expect to see a similar trend in New Zealand as more people understand the benefits these providers can offer,” he said.
In the last five years, Bendall said the alternative funding sector has grown an average of 19% per annum versus the main banks’ growth of 3% per annum.
“Looking at the pace of this growth and what we’re seeing overseas, we expect the NZ alternative funding sector to reach $25 billion by 2030,” Bendall said.
“At FMT, we don’t like the term ‘non-bank lender’. We feel it doesn’t accurately represent who we are or the value we provide. The term implies that we are merely an alternative, whereas we believe we can be a better option to mainstream banks.”
Instead, FMT’s strategy is to compete directly with the banks.
“We offer benefits that the banks are increasingly moving away from: flexibility, speed to market, and greater customer service,” Bendall said.
