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Friday 25th July
Ending with a hangover
Hi
Wednesday night's happy hour at the IFA Conference had a surreal ring to it. The theme was Happy Days, with rock 'n roll dancers and booze.
Ironically the event came an hour after Hanover announced its freeze on new investments and interest payments, and the event was sponsored by St Laurence, another falling finance company attending the conference with a trade stand, but nothing to sell.
In some ways this was the week that the glory days of the property-based finance companies came to an end.
There were plenty of other ironies at the conference. For instance Hanover sponsored the lanyards used for people to wear their name tags around their neck.
This led to plenty of jokes, especially considering previous sponsors of the lanyard and name tags were Provincial Finance (2006), Bridgecorp (2007) and now Hanover.
I doubt many sponsors will be queuing up for this opportunity in the future.
The Hanover "standstill" as we call it, has been amazing for the amount of venom spat by various commentators on the telly.
My view is comments like those are totally unhelpful and way off the mark. Now I am no paid mouth-piece for Hanover, but for a more balanced and meaningful take of the situation I recommend you read this story and Wednesday night's Blog.
It seems that Hanover, and its owners, may be suffering from a bit of the tall poppy syndrome at the moment. Also, judging by the speed that the Commerce Commission launched its investigation into the company, that a witch-hunt is on. Hanover, is becoming the magnet for all finance company dissatisfaction.
The other related story was the suspension of funds at the Canterbury Mortgage Trust. When that story broke we rang around most of the other regional mortgage trusts to gauge their reaction. You can read it here.
I guess the lucky thing this week was that the Reserve Bank cut the official cash rate to 8.00%, thus taking some of the headlines off Hanover and the finance company sector. This should provide some welcome relief to parts of the economy, but isn't necessarily so good for people putting money on deposit. Term deposit rates are already heading down and are likely to keep falling.
One of the pieces we put together in the past week is a review of the cash PIE funds, showing their advertised rates along with effective rates for 33% and 39% taxpayers. This is well worth a read and shows that not all PIEs are created equally.
We will constantly keep this table up-to-date for readers.
Another on-going story this week has been the continual changes at AMP Financial Services. Good Returns ran a story on Tuesday which has been updated since it was first published. If you haven't read it, or the update, then click on this link.
Mortgage news stories have been a little thin on the ground, however we do have some good coverage of the OCR changes and all the rate changes in the Mortgage Centre. ASB Bank is the first to move and others are likely to follow.
With people, our continuing theme is changes at AIG Life with news of some big appointments and changes. Also we have news about Kevin Podmore.
While finance companies are getting a bad rap, some are doing well. This week Marac announced that it had raised $105 million through its bond offer and set the rate at 10.50%. A good effort.
Also we have Allied Nationwide buying Speirs Finance. This adds some nice diversification to its book. What is also useful to observe here is that although consolidation of the finance company sector was forecast, very little has taken place.
One idea I have been pondering is that maybe some of these companies in the property funding space could all merge into one. There is a space in the market for mezzanine funding of this sector, but there are becoming fewer and fewer players. I will Blog on this further down the track.
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