Financial Institutions Performance Survey – Non-Banks shows an upward climb in a competitive and regulated environment. 2014 has been another record year for the non-bank sector, with profits increased by $133 million compared to the previous year. Despite extreme competition for lending the sectors performance has followed an upward climb in a heavily regulated environment.
Even though the non-bank sector has shown strong balance sheet growth, competition from retail banks and from within the non-bank sector has meant some erosion in interest margins across the sector.
Improvements in economic conditions has led to a growth in assets over the year. Motor vehicle leasing entities have fared particularly well because of the strong kiwi dollar and a catch up to replace aging fleets with spending deferred due to the Global financial crisis.
Waves of regulation imposed on the sector, with more to come, has seen criticism of the substantial costs required to be borne by entities in order to establish compliance.
On the horizon is the potential threat of a ‘disruptor’ entering the market and the consequential impact on incumbents. The retail and insurance industries are examples where disruptors have been able to come in and shake up the marketplace. Just as Amazon surfaced as the ‘big disruptor’ to the retail trading market, the non-bank sector could face increased competition from new technology based disruptors, the question is who and how, and which non-traditional competitor will it be.
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