Lenders now operating in a depressed economy

Press, 19 August 1982, Page 23

Lenders now operating in a depressed economy

Most of the measures announced in the 1982 Budget will obviously have repercussions for many months to come; what is ironic however, is the long-lasting effect of public anticipation of measures that were never, in fact, announced on Budget night! The lending sector for example, is now reaping the consequences of a widespread pre-Budget belief that Value Added Tax (VAT) was to become a reality.

"Lenders are now operating in a depressed economy," says Canterbury Savings Bank general manager Mr Frank Dickson," after a significant drop in deposits lost to the retail sector during a pre-Budget spending spree in anticipation of VAT." A slowing of deposit growth had naturally affected the lending ability of all lending institutions and a number of them had withdrawn from the market, Mr Dickson noted.

The impact this had had on the ability of potential home owners to borrow money is significant, he says, the current situation being comparable to the depressed state of the lending market earlier this year as Government Inflation Bonds soaked up many tens of millions of potential deposit dollars.

'The C. 5.8., among others, is still lending

however," he said, “but certainly at a reduced level." Mr Dickson acknowledged that many applicants for mortgage finance were being turned down. The ability to remain in the lending market was largely a consequence of the bank's planning system which enabled it to maintain a reasonable flow of funds in times like the present when there was a marked drop in deposit growth.

Another factor was the recent introduction of the C.S.B.’s High Interest Trusteebank (HIT) Account which had stimulated some additional funds.

“If the present (HIT) trend continues, the C.S.B. will be able to improve its lending capacity to a level consistent with both the growth in the national money supply and the credit guidelines laid down by the Reserve Bank,” Mr Dickson said.

Although fear of measures not announced in the Budget had an adverse effect, certain provisions that were made in the Budget should, according to Mr Dickson, further stimulate the lending sector. "A return to normal lending levels will, also be assisted by the Budget effect on private disposable incomes from October when the new tax measures come into operation," he predicted.

Taken as a whole, however, the over-all effect of the Budget was more detrimental than beneficial to lenders, he said, but he was fully confident the C.S.B. would maintain its growth record “at the end of the day."

The C.S.B.’s growth was higher than the national average for all trustee savings banks and fully endorsed confidence in the bank from depositors in Canterbury, Marlborough, and Nelson.

This depositor confidence was largely responsible for the significant amount the C.S.B. currently had invested in mortgages (more than $250 million) and in personal and term loans, overdraft and Trusteebank Visa (in excess of $25 million). In addition, and in support of the Government guarantee on depositors’ funds, the bank had $l7O million invested in Government stock.

Depositors’ funds now stood at $450 million, Mr Dickson noted. “The C.S.B.’s outstanding achievement has been in spite of paying tax since our inception in 1962,” he said. In the last five years alone, more than $6.5 million had been paid out in tax, he noted.