Changes in finance sector accelerating

Standard & Poor's says it has observed an increased pace and urgency for change in New Zealand finance companies, driven mainly by impending regulatory developments.

Thursday, 24 May 2007

In the long term, change within the industry should strengthen credit quality overall, although the short- to medium-term impacts are less certain," Standard & Poor's director Gavin Gunning says.

"The main impetus for change appears to be companies seeking to better position their businesses in anticipation of regulatory developments expected over the next year," Gunning says.

The range of matters finance companies are considering are extensive. They include initiatives to diversify funding sources, streamline organizational structures, more closely scrutinize the performance of individual products and business lines, and evaluate opportunities for mergers and strategic alliances.

Standard & Poor's expects that the New Zealand finance company industry, which is characterised by a large number of market participants relative to the size of the industry, has considerable scope for consolidation. New Zealand finance companies are predominantly funded by the New Zealand retail sector.

"A smaller number of individually stronger finance companies should result in greater confidence for New Zealand retail investors and financial advisers," Gunning says.

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