Marac will pounce when rivals collapse

Marac Finance will jump at the opportunity to snap up bargains as it gears up its plans to build a new listed bank.

Thursday, 26 August 2010

Chief executive Jeff Greenslade said Pyne Gould's finance arm was well-placed to make opportunistic bids as its rivals struggle for survival in a difficult period for the finance sector.

"We'll take the opportunity to buy distressed assets, and will actively pursue them going forward," Greenslade said in a conference call.

Marac is looking to combine its resources with Canterbury Building Society and Southern Cross Building Society to create the country's only locally-owned listed bank. Stakeholders are expected to vote on the proposal later this year, with the merger likely to be completed by the middle of next year, when an application will be made for a banking licence.

Greenslade said the banking merger will help Marac shrug off the higher burden of entry into the government's extended retail deposit guarantee, which comes into effect in October.

In the meantime, Marac will have to comply with the Reserve Bank's prudential requirements for non-bank deposit takers, and chief financial officer Sean Kam said he expects the financier will exceed the minimum 8% ratio of tier 1 capital.

"We expect it will be about 9.57%, leaving us well-placed in the non-bank deposit taker regime [when it comes into effect] in December," Kam said.

Marac reported a net profit of $14.3 million in the year ended June, beating its projection from last year's prospectus, but was 25% below last year's $19.1 million.

Greenslade said most of the company's growth came in its consumer business, having taken on the GMAC motor vehicle loan book and entered into a joint venture with the Automobile Association. The AA relationship is being touted as a major part of the bank strategy, in that it will provide a large ready-made customer base, he said.

The commercial business struggled as small and medium-sized enterprises shied away from borrowing money for new equipment as they tried to rein in their costs, while the value of Marac's property book deteriorated more than expected. The firm boosted its provisioning for impaired assets to $23.8 million from $13.3 million a year earlier.

As at June 30, Marac held $829.4 million of debenture stock.

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