Expert says the sector will not be expecting double digit growth
The non-bank sector has managed to recover to “almost 2019 levels” of business confidence after plunging to record lows earlier this year – a very unexpected turn for a sector which was booming throughout 2019, according to KPMG’s head of banking and finance John Kensington.
The giant recently released its 2020 performance survey of non-banks, and Kensington says the ‘lending halt’ that happened through the first and second lockdowns impacted lender’s books significantly. However, he says the bounce-back since the lockdowns has been strong, with June in particular bringing a “release in pent-up activity” which managed to continue into the subsequent months.
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“A sort of ‘lending halt’ occurred as we went into Alert Level 4 lockdown, but there were progressive bounce-backs as we went back down the levels to the relative normality that we have today,” Kensington commented.
“The first lockdown was longer, but the second one also happened to be in winter. There was no sunlight, you’d had enough of it, and you could see the damage that it was doing to your business, so a lot of people actually found that harder, even though it was technically shorter. It reinvigorated the uncertainty, and the main point that has come out of that is that nobody wants a third, fourth or fifth lockdown.”
“Initially some of the bank funding dried up, or the banks wanted to have more information before they did anything – but that’s slowly returning to normal,” he added.
“But the lending halt, particularly in the first lockdown, meant a lot of lenders’ books were going backwards in size. In this sector, that is unusual as lenders have had staggering double-digit growth year on year. That won’t be the case this year.”
Despite some cautiously optimistic signs, Kensington says the full impact of the lockdowns may still be to come. September 2020 saw a 32.5% increase in the number of unemployed New Zealanders compared to the previous quarter, and the full impact of the wage subsidy ending will only be fully clear in 2021.
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When it comes to predicting 2021 performance, Kensington says it is incredibly difficult to make a solid call.
“Predictions and forecasts are very difficult to make with any levels of certainty,” Kensington said.
“As the Auckland lockdown in August demonstrated, things we take for granted can change incredibly quickly. Many participants we spoke to are concerned the dire predictions could turn out to be correct, it’s just that the timing was wrong. We will see more through Q1 and Q2 next year.”
