NZ Home Loans is about to be 'saved' by a bank

The sale of the country's biggest non-bank home mortgage lender, New Zealand Home Loans, is likely to be announced today - to a trading bank.

The most likely buyer of the $1.5 billion private Hamilton company's loan book is its main funding provider, ASB Bank.

New Zealand Home Loans does not publicly advertise but last year loaned $700 million in mortgage funds and predicted it would be lending $1 billion in new loans a year by 2008.

Chairman Neil Richardson said last year that the company's home-loan book was valued at $1.5 billion and its lending book was growing at about $300 million a year.

Richardson, who owns 21 per cent of the company, and co-founder John Erkilla with 62 per cent will be the most significant beneficiaries of any sale.

The balance of the shares are owned by general manager Phil Harris.

New Zealand Home Loans' starting proposition in 1996 was not to charge transaction fees and "save you from the banks". About 20 per cent of New Zealand's current account deficit could be attributed to bank profits going out of the country, mostly to Australia, Richardson said last year.

New Zealand Home Loans aimed to reduce the debt of families and small businesses, instead of loading them up with more.

Borrowers channel all their income, including wages, dividends, bonuses and savings, into their home loan. Interest is calculated daily so the longer the income is in the account the more interest savings are made.

The Business Herald late last year reported that trading banks were eyeing the successful Hamilton lender, with ASB most likely leading the interest. ASB - which is fully owned by Australia's Commonwealth Bank - provided most of New Zealand Home Loans' mortgage funding through subsidiary Sovereign Financial Services.

The ASB would not comment at the time but noted New Zealand Home Loans had a "very good relationship" with Sovereign.

New Zealand Home Loans has 26 branches nationwide - including six in Auckland - 25 of which are franchised. The 26th is in Greenlane, retained by the company as a training operation. It plans to expand that to 40 branches.

It said annual revenues last year were $10 million.

The private lender, which still does not charge transaction fees, was founded in Hamilton in 1996 with $100,000 by Erkilla and Murray Ferguson.

Richardson said last year that one of its key competitive advantages was developing and owning its own personal and family budgeting software for clients.

NEW ZEALAND HOME LOANS

* Founded in Hamilton in 1996.

* The biggest non-bank home lender.

* It lent $700 million last year. No transaction fees.

* Doesn't advertise.

* 26 branches nationwide.

* Aiming for 40 branches and $1 billion in lending in 2008.