Whilst this represents a slight drop from the previous quarter’s 7.31%, it’s important to view this within the broader context of our loan book’s overall performance and the current economic landscape.
The main reason for the decrease is the fund’s higher-than- usual cash holdings in recent months, attributed largely to loan repayment rates exceeding forecasts. Additionally, a period of slower lending was influenced by market uncertainty following last year’s election, compounded by the traditionally quieter lending months of late December, January and early February.
The higher levels of repayment reflect the quality of our loan book; borrowers have opted to make repayments earlier than required, indicating their capacity to do so. Although there were lending opportunities, they did not meet the quality standards we target, and we were prepared to be patient.
Our current 90-day plus loan arrears sit at an impressive ratio of 0.8%, reflecting the quality and diversification within our loan book and aligning us with New Zealand’s main trading banks. In a tougher economic environment and with higher interest rates, we have noticed a slight increase in short-term loan arrears. We actively manage these loans, and the vast majority do not transition into longer-term issues.
Despite a slow start to the year, we have a solid pipeline of transactions, and liquidity is now returning to within our target range. We have noticed more competition entering the lending market; however, we are generally maintaining our competitive lending rates.
Growth in our sector continues. Recent RBNZ statistics show that in the last five years, lending completed by banks has grown at 3% per annum, whereas lending outside of banks has grown at 19% per annum. We expect this trend to continue (albeit at a slightly lower rate), in line with international trends.
We are actively investing in our team and technological infrastructure to improve our service quality further for both investors and borrowers. Andrew Western has recently joined us as our new CFO, and Matt Tucker has taken on the newly created role of Chief Technology Officer, as we continue to develop our technology roadmap. This includes continuous enhancements to our cybersecurity framework. Additionally, we plan to add several new roles this year to support further growth on both the investment and lending sides of our business.
Alongside investing in our people, we continue to heavily invest in technology to ensure the best possible customer experience.
Despite the challenging operating environment, FMT continues to perform well. The FMT brand is growing in both our investment and lending areas of the business, and we still see great opportunities – hence our continued investment into FMT.
Once again, thank you for the trust you place in FMT.
Paul Bendall
CEO
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