Non-bank reveals opportunity for NZ advisers
With banks tightening their belts amid economic turbulence, Liberty CEO James Boyle said there is “massive opportunity” for New Zealand advisers to work with non-banks who are well placed to service non-standard clients.
Speaking after the release of the non-bank lender’s half-year results, Boyle (pictured) was optimistic about the opportunity to grow its New Zealand arm despite the downside risks.
“With interest rates up and the economy uncertain, having a complimentary lender like Liberty is key to be able to help as many people as possible,” Boyle said.
“We’ve seen that in our New Zealand business over the past six months where we’ve increased originations, especially through our adviser channel.”
New Zealand revenue up, overall profits down
While Liberty Financial’s New Zealand channel is significantly smaller than its Australian counterpart, the company has already set its sights for growth appointing new hires in recent months.
“We’ve looked to expand our team in New Zealand,” Boyle said. “We’ve increased our head office team and Igor (Stychinsky, the company’s COO) has expanded our resources to ensure we have the right products that meet the needs of New Zealand borrowers.”
This has been seen in the results, increasing its external revenue generated in New Zealand by nearly 25% the period between Dec. 31, 2022 and Dec. 31, 2023.
While that may be positive, the company also acknowledged the risk within the market after having its net profits after tax slashed by 34% over the half year period.
However, Boyle said the profit decline was anticipated given the 425-basis point increase to the cash rate.
“The reduction in profit reflects the impact of trading through a period of multiple and sustained interest rate increases,” he said. “Importantly during this time, we have managed to help more customers, increase our financial assets and our loan losses remain low.”
NZ’s deteriorating macro-economic performance
Over the period, Liberty said that New Zealand’s macro-economic performance had “continued to deteriorate to a greater extent than experienced in Australia”.
And the financial results point to this potential risk to continue. Yet Boyle saw the silver lining in this riskier landscape.
“While New Zealand may face different domestic challenges such as changes to regulations, by and large, Australia and New Zealand move in unison with the macro-economic trends,” Boyle said.
“Sometimes New Zealand is faster to improvise change than Australia, which helps us better navigate the new territory.”
Overall, Boyle said both New Zealand and Australia have “managed very well” with what has been a “very tumultuous economic scene”.
“With more uncertainty to come in New Zealand, it presents an opportunity for non-banks like us.”
Nonbanks provide alternative in uncertain times
This opportunity stems from the fact that banks become more risk averse as the economy gets riskier.
Boyle said the prudential regulator in New Zealand has done “a very good job” at navigating the financial system by having an active influence and say over what the banks’ risk appetite looks like.
“What that means is the banks are subject to these regulations and reduce their risk appetite as the market gets riskier to ensure they have consistent flows through their business and the general banking sector,” Boyle said.
“We are here to provide an alternative as we are not subject to the same regulations and therefore have a different risk appetite. In times of change and difficulty, nonbanks have products that help borrowers with non-standard circumstances and criteria.”
Boyle said the incoming debt-to-income ratios and LVR restrictions are the “perfect example” of the type of regulatory change that could make nonbanks more attractive to both borrowers and advisers.
“We are not subject to these regulations, which gives non-banks like us at Liberty a point of difference to cater to new borrowers in the future,” Boyle said.
“For New Zealand advisers, I urge you to come check us out and give us a call about what we can offer your clients.”
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