Commercial Financier’s growth slows

Press, 4 July 1979, Page 19

Commercial Financier’s growth slows

PA Wellington Shareholders at the annual meetings in Wellington of two of the countries major finance companies have been told of their companies’ expectations of slower growth I in lending this year.

satisfactory level. However," this was in respect of ah relatively short period, he| said. The medium to long-term] prospects were excellent, he] said. I In a further move to| I widen the range of finance!: [facilities offered by the com-! !pany, and to increase market! ; penetration, the Bank of New Zealand had agreed to allow its network of 2311 branch offices to act as agent for B.N.Z. Finance in hire-purchase financing. Mr Chapman said that this entry into the consumer I finance market represented lan important step in the development of closer rela-j tions between the bank and the finance company, and a : further diversification of the ■ group’s activities. .1 “Limited benefit is ex- . pected to flow from the agreement initially, because, over recent months, the Government has implemented measures to cut the rate of growth of private sector lending. However, lo-nger-term prospects are encouraging,” said Mr Chapman.

Clifford Plimmer) at the annual meeting. “I believe we can probably maintain the current level of profitability, but the costs of the company’s day-to-day operations are continuing to rise, and are subject to close [Scrutiny,” he. said. The company’s profits for the first three months of the current year were about the same as in the comparable period of last year. Noting that the past year had been one of growth, with tangible assets rising 32.5 per cent, deposits 28.7 per cent, and trading profit per cent to $2,422,000, Sir Clifford said he had doubts whether this rate of growth could be continued in the present year. Businessmen are not confident in the economy, and have been reluctant to increase their investment in plant, and equipment. As a result, we have noticed a general slow down in the volume of loan applications. “In addition, high interest rates are continuing, and this has had the effect of increasing still further our total cost of borrowing. Maturing deposits carrying lower rates of interest are being renewed or replaced at a considerable increase in cost,” he said. The group’s lending was primarily in the commercial, and industrial sectors. “These sections have been required to face substantial cost increases during the

past 12 months, which has, severely strained their cash) resources,” Sir Clifford said.

“Many businesses had' been forced to postpone the replacement of productive plant and equipment because they could not pay its cost and finance at current interest rates,” he said.

Discussing the Budget, Sir Clifford said it prepared the groundwork for further export development, and should help restore some business confidence. “While the Government appears determined to contain the rate of public sector spending during 1979-80, other measures in the Budget were predictable, and did not go far enough to ensure a stable growth pattern for the next year or so. “Greater emphasis should have been placed on the movement towards higher indirect taxes. A greater proportion of public sector expenditure could have been funded from this source,” he said.

Replying to a shareholder, the general manager (Mr R. E. Baker) said that the company was doing its best to help customers with financial difficulties who had fallen behind in their payments.

“It is important that we retain their goodwill. In the present circumstances it is impossible to pass on completely the increased cost of borrowing,” Mr Baker also said.