NZ lender has banks’ interest

Burgeoning non-bank home mortgage lender New Zealand Home Loans is being eyed for takeover by trading banks, with its main funding provider, ASB, thought to be leading the interest.

The Hamilton-based company, which does not advertise but will this year provide more than $700 million worth of home loans, gets most of its mortgage funding from ASB subsidiary Sovereign Financial Services.

Chairman Neil Richardson would not comment on whether the company was in talks with ASB, but he confirmed approaches from two trading banks and an investment company recently.

ASB acting managing director Peter Hall said he could not comment but noted New Zealand Home Loans had a good relationship with Sovereign.

New Zealand Home Loans is the country's biggest non-bank home lender with a home loan book of $1.5 billion, Richardson said. It was forecast to be lending $1 billion a year in new home loans in three years. Its lending book is growing at about $300 million a year.

It has 26 branches nationwide - including six in Auckland - 25 of which are franchised. The Greenlane branch is retained by the company as a training operation.

The company, which had revenues last year of $10 million, planned to expand to 40 branches, Richardson said.

It does not charge transaction fees, and its starting proposition in 1996 was to "save you from the banks", he said.

New Zealand Home Loans' focus was on reducing the debt of families and small businesses, instead of loading them up with more, Richardson said.

"Its concern is the total cost and time of loan repayment rather than simply the headline interest rate."

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

Richardson said the company's success was both a frustration and a marketing opportunity for banks. The challenge for the company in any merger or acquisition negotiations was ensuring its operating method was preserved.

"We are quite clear we would not compromise that position. We would only enter a relationship whereby we were able to enhance that position and be able to grow at a faster rate. To be taken over as a sellout is not being considered at all."

Independent research had shown NZ Home Loans had the lowest level of arrears and defaults in the lending market and the highest brand loyalty, Richardson said.

The company was founded in Hamilton in 1996 with $100,000 by managing director John Erkilla and Murray Ferguson. It is 62 per cent owned by Erkilla with Richardson holding 21 per cent and general manager Phil Harris the balance.

Home Loans

* New Zealand's biggest non-bank home lender.

* This year it lent $700 million.

* Its competitors: trading banks, building societies, finance and insurance companies, trustee companies, credit unions, Wizard Home Loans. No transaction fees.

* Doesn't advertise.

* 26 branches nationwide.

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

* Founded in Hamilton in 1996.