Fourteen percent of Marac's deposits not guaranteed

Marac Finance has reported a net profit after tax of $14.3m against a forecast in last year’s prospectus of $13.7 million.

Thursday, 26 August 2010

Marac chief executive Jeff Greenslade says a highlight for the year under review was the strength of the balance sheet and the quality of the company's earnings, especially from vehicle leasing and finance.

Post balance date Standard and Poor's has made a positive to Marac's credit rating outlook taking it to stable.

"It not only reflects the underlying strength of the business but gives further impetus to the ‘Heartland' banking initiative now being advanced in conjunction with CBS Canterbury (CBS) and Southern Cross Building Society (SCBS).^"

In confirming MARAC's credit rating at BB+, Standard & Poor's indicated amalgamation is the key path to regaining an ‘Investment Grade' credit rating, which bodes well for Heartland and the goal to become a bank, Greenslade says.

Marac's gross financial receivables at June 30 were $1.1 billion, which was broadly in line with the forecast but down $175m on the previous year. This principally relates to Marac's decision last year to reduce its exposure to the property sector.

In addition its commercial loan book was lower due mainly to a reduction in risk concentration and reduced investment by businesses in the SME market. However, the consumer book grew significantly through both organic growth and the acquisition of GMAC New Zealand's retail book.

The mainstay of Marac's funding continues to be its retail debenture program. Retail investors have continued to support the company with solid levels of new funding and reinvestments.

Marac introduced non-guaranteed deposits in late January this year to wean both the company and investors off reliance on the Crown guarantee.

Currently there is $115m of deposits not covered by the guarantee.

"We are definitely finding more investors are looking through the guarantee at the quality of the institution they are investing in."

In total Marac has $829 million in retail funds as at June 30.

In the year ahead, a key focus for Marac will be delivering on its Heartland banking strategy. Becoming a bank will both reduce Marac's cost of funds and drive earnings growth. In the short term, however, there will be additional costs related to the Crown Guarantee as well as additional costs associated with the merger. The expected benefits of delivering on this strategy will exceed these one-off costs.

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