Strong growth by Finance Houses

Press, 3 August 1976, Page 24

Strong growth by Finance Houses

PA Wellington The finance houses are well placed for the economic recovery, and they have established a strong growth away from the sluggish levels of 1974, says the chairman of the New Zealand Finance Houses Association (Mr D. A. Clark) in his annual review. The finance houses have developed to become a SSOOOM grouping of financial intermediaries. Shareholders investment alone amounts to S7OM in aggregate—perhaps large in absolute terms, but still far from approaching a dominant position in the financial market, he says. The adoption of the flexible interest rate policy in March initially threw rates into disarray, but they are now well-established on a downward trend and cuts in rates have been “substantial,” Mr Clark says. “The easier liquidity and the increased borrowing competitiveness of the established institutions is pointing to increased economic efficiency in the financial market; one of the basic objectives of the measures.”

The F.H.A. would like to see this policy taken further with the implementation of

central bank open-market activities in financial securities.

This would mean that when excess liquidity exists, the central monetary authority would sell official securities at an attractive interest rate, taking up liquidity to the extent that may be necessary, pushing up investment yields and in so doing deferring expenditure no longer warranted under the revised conditions. The result of this is that “in time the Government would then probably feel sufficiently confident to abandon the formal Government security ratios which exist today,” he says. The F.H.A. companies had a total of $368.0M out in loans advances and leasing at March 31—19.5 per cent for motor vehicles, and 19.4 per cent for industrial and agricultural machinery. Commercial vehicles loans totalled 17.6 per cent, and property loans 16.6 per cent.

Shareholders funds rose $67,392,000, and total liabilities and capital increased $109.0M to $493,437,000.