Finance companies lift game

Monday 27 December 2004

High interest rates are winning new depositors and higher visibility for finance companies, but are not winning significant market share from banks.

By The Landlord

A new report by international ratings agency Moody's Investors Service said New Zealand finance companies had increased the deposits they took in by 5.4 per cent to $6 billion in 2004.

Their visibility in the market has also increased as they are taking an increasing slice of household deposits, to reach a 15 per cent share of that market in 2003. That was up from 12 per cent the year before.

But the growth has come as the market as a whole has expanded, so banks maintained their 95 per cent share of total deposits in 2003 and 2002.

They also saw a rise in customer deposits of 6.7 per cent last year.

Moody's analyst Marina Ip said finance companies' small share of the overall market meant they did not pose a threat to banks, their ratings, or the banking system.

"Finance companies currently do not have large market share in terms of deposits

and as such any liquidity problems arising from finance companies getting into trouble would not have a disastrous effect on the banking system," she said.

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