Corporates are turning to the bigger KiwiSaver asset managers as a source funding as the banks pull back on lending to align their balance sheets with more stringent Reserve Bank requirements, Fisher Funds' David McLeish says.
As part of its response to the economic impacts of the Covid-19 pandemic, theReserve Bank delayed implementation of planned increases to bank capital requirements by at least 12 months and imposed dividend restrictions to ensure banks can use current capital buffers to support lending.
Even though tighter capital requirements are still some way off, banks have been adjusting their lending practices in anticipation of a tougher regime, and are increasingly teaming up with KiwiSaver managers to fund help clients.
McLeish, Fisher Funds' fixed income and cash portfolios senior portfolio manager, said corporate funding was becoming more diverse.
"A lot of people don't recognise the benefits of KiwiSaver to the extent that it is now becoming quite a large financing vehicle for parts of corporate New Zealand," he says.
"On top of that, you have got the banks who are retrenching back from that market because the regulatory changes meant that the profitability associated with lending to corporates is not what it used to be, because they now have to hold a lot more capital against that loan, for potential future losses," he said.
"What we have seen is a lot of banks coming to us and introducing their corporate customers to us to see if we can lend to them, either in a private format or a loan alongside the banks themselves - or in a bond format that is potentially listed on the NZX," he said.
"A lot of corporate borrowers are coming directly to KiwiSaver providers like ourselves because we have got quite a lot of capital. We can be a sort of one-stop shop."
McLeish said KiwiSaver providers were not setting themselves as competition for banks, but were there to help provide long-term financing solutions.
Even though the Reserve Bank, because of Covid-19, had granted the banks a reprieve from tighter capital requirements, the banks were nevertheless already adjusting their lending to take in into effect.
"They are very much of the view that it is coming and they want to find a solutions that are mutually beneficial to them as the bank.
"For us, it is a great growth opportunity.
"The New Zealand capital markets have almost been held back because the banks have been keen to hold on to those lending relationships," he said.
