I am surprised how high the provision for loan impairment is at UDC (page 33 UDC 2014 prospectus) has increased ($7,123m to $11,733m up 65%) since FY2013 . Granted it is still much less since the depths of the GFC.
From note 8 the resultant provisions on the books without bad debts already written off, with reference to the whole EOFY2014 loan book:
$31.805m /($2,272.081m+$31.805m+$115.310m+$8.964m) = 1.31% of gross value loans on issue
The figures for ANZ New Zealand, suitably disentangled from UDC are (using note 12: 'Net Loans and Advances' based on ANZ New Zealand's September 30th 2014 update to the Reserve Bank)
($666m-$31.8m)/ ($96,902m -$2,148m) = 0.67%
Compare that to Heartland (HNZ AR2014, Note 20 'Finance Receivables' )
($16.361m+$8.000m)/ $2,613.754m = 0.93% of gross value of loans on issue.
Of course we all know that UDC isn't a 'real' finance company, even to the extent that they don't have to keep the Reserve Bank updated on their financial position. As long as the parent ANZ New Zealand (who have full control of the UDC purse strings) keeps their own disclosure up to date, the UDC are off the radar as far as the Reserve Bank of NZ is concerned. In practice UDC are simply a 'marketing arm' of the ANZ. If anything that might make UDC potentially more 'reckless' than fully independently owned finance companies. That's because they know that ANZ Bank will bail them out if they get into trouble. So I think it is interesting that in practice UDC are less reckless with their lending policies (hold a lower relative provision for credit impairment on the balance sheet) than Heartland.
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