Press Release – Motor Trade Finances
New loan sales of $288.0m (2011: $267.9m), growth in a slow economy • Total assets recovered to $408m (2011: $405m) • Net interest income, as percentage of average finance receivables, increased to 10.29% (2011: 8.92%) • Profit before commission …
Profit after tax was $4.6m (2011: $5.6m).
• New loan sales of $288.0m (2011: $267.9m), growth in a slow economy
• Total assets recovered to $408m (2011: $405m)
• Net interest income, as percentage of average finance receivables, increased to 10.29% (2011: 8.92%)
• Profit before commission and other gain (loss) as percentage of average total assets increased to 8.58% (2011: 7.68%)
Profit before commission and other gain (loss) was up 5%, to $34.9m, resulting from strong interest margin and funding efficiencies. Commission paid to shareholder originators increased by 8% to $27.4m. An unrealised loss on the fair value of financial instruments totalled $0.68m, against a gain of $0.33m a year ago, a negative movement of $1.01m, giving net profit after tax of $4.6m, compared to $5.6m last year.
Sales hit a low point in 2010 of $267m in new loans. 2011 was marginally better, at $268m and 2012 is 7% up, at $288m. Market share, as measured by security registrations, has remained above 12% since December 2011, on an upwards trend. Second half sales were 8.4% up on first half sales, mostly on the back of improving market share, in a soft market. Sales have improved further, in the current year.
Expense, excluding bad debt, was up 21% on 2011. During the GFC, expense growth was kept to a minimum, with operating expense, excluding bad debt, maintained at a consistent level from 2007 to 2011. Recovery in credit markets and restored confidence has driven significant catch up expenditure, mostly IT related, on top of additional compliance requirements, resulting from financial adviser legislation. Included in expense is a charge of $1.003m, the write down of investment in a loan origination system. The appointed vendor was unable to deliver to expectations and we abandoned a portion of the work completed, in favour of going with another vendor, whose product was not available when we started the original project.
Bad debt written off totalled $1.4m (2011: $1.0m), all of which was provided for in previous years.
Capital at 30 September 2012, at 17.5% of total assets ($71.4m), is sufficient to underpin projected growth over the near term.
Arrears continue to improve, at 30 September 2012 31+ day arrears stood at 0.60% (2011: 1.85%), a reflection of the continued focus on quality lending, supported by improved reporting and active management.
In spite of the problems of recent years, and the economic uncertainty that still exists globally, MTF has continued to prosper and the accelerated investment of the last twelve months provides a solid platform for the future.
Global markets for New Zealand exports continue to be weak, on the back of a currency that is overvalued for the very reason that our trading partners have not yet found their way, after the GFC. Although we expect demand for cars, and credit to finance cars, to be soft into the foreseeable future, economic activity will continue and MTF will be there to take a greater share.
We can be successful through prudent lending, for the benefit of the borrower and the lender, by providing better access to information, more transparency and by respecting the needs and challenges faced by borrowers.
We face the future with confidence.