Shrinking home ownership will change SME lending, Kiwibank's Jurkovich says

Friday 24th August 2018

Shrinking home ownership and different ways of doing business will change the way banks lend to small and medium-sized enterprises, says Kiwibank chief executive Steve Jurkovich.

The state-owned lender's new chief sees small businesses and start-ups as a ripe opportunity, which also fits the culture of being a Crown-owned company. Small business owners often use their home for security for funding, however, Jurkovich said that way of lending is increasingly "unrealistic", especially where people are self-employed, or working part-time.

"As home ownership shrinks, being able to back up the security with a home is going to be a bit tougher than it has been in the past," Jurkovich told BusinessDesk. "There's a whole lot of new tools and partnerships that I'd like us to get into. Some of the cost of assessing those loans can be much easier and faster than it's been in the past, so there's a big opportunity to get in there and make a difference for what is the backbone of New Zealand business."

Reserve Bank data show business lending at $111 billion as at June 30, growing at a 5.7 percent annual pace. That compares to $268 billion in consumer and mortgage lending, which is growing at a 5.9 percent pace.

Kiwibank's unsecured retail lending, which spans credit cards, personal loans and SME lending, was largely flat in the year through June 30. Gross loans totalled $487 million, up from $480 million a year earlier, and provisioning for bad debts was unchanged at $9 million.

The state-owned bank's corporate gross loans rose to $785 million from $720 million a year earlier. Residential mortgages still dominate its loan book at $17.07 billion, up from $16.65 billion a year earlier.

Kiwibank's interest in the "gig economy" isn't strictly in lending to it, with the Kiwi Wealth division very active in fintech. It's supported the Lightning Lab fintech accelerator, which spun out Sharesies, and is the first and only financial services provider licensed to provide online algorithmic financial advice.

Jurkovich sees Kiwibank branching out more broadly into the wider financial services in an effort to show its relevance to customers.

(BusinessDesk)

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