New competitor for finance company money

Weekly Rate Change Report: The deposit taking sector continues to change rapidly at the moment. As we have reported in recent weeks it has been banks putting pressure on finance companies. Now there is a new force at play.

Monday, 17 September 2007

Rabo in particular, shows how investors are seeking safety. It was seeking to raise $400 million in a unsecured bond offer, but kept the door open for a bigger fund raising.

Following the book build process which finished on Friday it looks like the offer will attract around $900 million – even though the promotors have yet to set an interest rate.

Market talk is that the AA rated securities will have a coupon of around 9-9.25%, however with such strong demand the rate could be at the lower end of this range.

Meanwhile Origin, which owns a controlling stake in Contact Energy, is seeking to raise $ million in a preference share offer.

With pressure coming from these two offers, which will be listed on the NZDX, banks have decreased their rates and finance companies continue to push rates up.

Amongst the banks the one-year rate remains the competition ground. BNZ made increased of between 50 and 60 basis points (depending on the minimum invested), ANZ bumped up its interest-at-maturity (IAM) special by 10 points to 8.60% and Rabo added another five points to its offer.

Meanwhile ASB and BankDirect introduced nine-month IAM specials of 8.60%.

NBNZ and RaboPlus also shaved a little off their longer duration term deposit rates.

Amongst the finance companies there were some pretty significant increases, some close to a 1% (100 basis point rise).

Equitable reported the largest increases with its debenture rates rising between 35 and 95 points. It also increased its bond rates.

A number of the big players pushed up rates during the week including South Canterbury Finance, UDC and Strategic.

Smaller players to follow suit include Mascot, Asset Finance and MFS.

Co-operative PSIS increased its call accounts by between 5 and 30 points.

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