Banking insight from BNZ
Two of BNZ’s business-focussed team came to talk to us about what support BNZ has available for small and medium enterprises and what impact Covid 19 has had for banks. There’s also useful information about what some of your clients seeking a new build or renovation loan might expect
You can either watch the videos linked below or read the transcripts further below those links. The two videos combined are over 30 minutes in duration in total and will count towards your elective skills maintenance points.
We’ve included times when each question is asked if you want to jump to a particular question. But don’t skip the intro at the start of the first clip…
Nicola Matthews, Head of Consumer, Micro & Small Business – Bank of New Zealand. Nicola explains the impact of Covid-19 for banks and covers:
- What have banks done to support customers through Covid-19? (15 seconds in)
- What has happened in the housing and lending markets over the past 6+ months? (8 mins, 40 seconds in)
- How BNZ is supporting customers with their home loan needs – in particular impacted: those building, renovating or have an existing approval (14 mins, 17 seconds in)
Visit BNZ for more: www.bnz.co.nz
Amy Stewart, Head of Business Activation – Bank of New Zealand. Amy explains what BNZ is doing to help its SME customers. She covers:
- What kind of conversation can a business owner expect if they contact the bank to talk about their business? (16 seconds in)
- What is the BNZ Business Finance Scheme? (1 min 25 seconds in)
- What are some of the other ways that BNZ supports business? (2 mins 13 seconds in)
- What is MyBusiness Live? (14 min 17 seconds in)
Learn more about MyBusiness Live: www.mybusinesslive.bnz.co.nz/content
Nicola Matthews, Head of Consumer, Micro & Small Business – Bank of New Zealand
1) What have Banks done to support customers through COVID?
It goes without saying that it’s been a year like we’ve never experienced before and with that has come some market conditions that we could have never anticipated.
Like all of you, banks have had to manage with unexpected changes to our business model literally overnight and how we manage with no branches, and suddenly have almost an entire work-from-home workforce with unprecedented customer demand, to talk about the support we can provide. WE also worked closed with government and the Reserve Bank around how as an industry we could best support New Zealanders through this.
We closed our all our branches with two days’ notice for our customers and our 0800-contact centre experienced a 30% increase in call volume literally overnight! Importantly we needed to help our customers make the right decision for them around what would see them cope with COVID impacts and for many that had literally seen their industry and employment prospects disappear overnight. It also meant the need for digital interaction with banks and payments needed to change at pace, with cash almost becoming non-existent and the demand for online banking, contactless payment and cards becoming the preferred method of transacting.
Just for some context from a BNZ perspective, we had over 6000 people require deferrals on their home loan of up to six months, 22 thousand customers move their loan onto interest only for up to a year, and significant number of customers reduce their repayments. At the peak we had 2000 customers needing home loan assistance per day.
Extended home loan deferral options remain for borrowers to put in place up until 31 March 2021 as with interest only terms. Beyond this date the Bank will be required by regulators to undertake an assessment on the ability to service the debt longer term and work with customers on the best outcome for them.
We will touch on support for businesses as a result of COVID a bit later in our chat.
2)What has happened in the housing and lending markets over the past six months?
The performance of the housing market post Level 4 lockdown has exceeded many predictions with strong levels of buyer enquiry, low levels of stock in some geographic locations and record median prices. Banks and brokers continue to be flat out with customer enquiry and activity especially in the home loan space.
- Low interest rates, expats returning to NZ, removal of the Loan to Value Ratios requirements by the government, first home buyers entering the market and low supply of dwellings are all contributing to the current rise in house prices. This has seen demand outweigh supply and therefore price pressure that comes with it
- The wage subsidy scheme has kept more people in employment and alongside the mortgage deferral relief by the Banks also removed any forced sale situations. We are seeing some homeowners opting to sell of their own accord however where they don’t see any immediate return to work opportunities for example those in the airline industry.
- With lockdown and the inability to travel overseas we’re seeing an increase in homeowners undertaking renovations to their properties and approaching banks to do so.
- According to August REINZ Data, median house price for NZ excl. Auckland increased by 14.2% to $570k (up from $0.499m Aug 19). Auckland median house price increased by 16% to $950k (up from $819k Aug 19). A number of regions including Northland, Waikato, Manawatu, Taranaki, Canterbury and Southland all saw record median prices during August as well. Nelson was up 40% YOY with large increases in Southland, Hawkes Bay, Wellington and Northland.
- REINZ mentioned four regions which saw an annual decrease in sales volumes – Gisborne was down 31.5% YOY, Marlborough at 10.1% with small decreases for the West Coast and Otago.
- Post lockdown, Queenstown long term rental rates have significantly reduced with rental accommodation previously rented on a short-term basis being added to the market. Values here are estimated to have fallen between 5% and 7% post lockdown with this being below many expectations. Wanaka is currently experiencing good levels of buyer enquiry.
3)How are you supporting customers with their home loan needs, in particular impacted those building, renovating or have an existing approval?
The Bank is fully open to supporting our customers to buy homes, renovate their home or build their home. While many Banks were taking a somewhat ‘watch and see’ view, given the unprecedented times during lock down and uncertainty during that period, but the market has held up stronger than expected.
During lockdown periods all conditional approvals, all our existing houses under construction and turnkey applications were honoured, which was important to remove stress on our customers during a highly uncertain time and also provide certainty to builders supporting them. As we move more into living in a world with Covid, there is a number of factors that we look at when lending, some of which have had some impact due to COVID.
Our overriding objective is to help our customers achieve their goals and dreams but equally not to put them in a situation that will cause or increase financial stress. Some of the things we look at when assessing each application for lending include:
- Area/location of build. i.e. it is a known subdivision and strength of the local market now and looking into the future;
- Local Knowledge around building company, reputation, experience in industry either at a national or local and community level. Do builders or developers have a relationship with the BNZ?
- A good deposit with genuine savings (or through existing equity in existing property)
- What type of building contract the customer is looking to enter into, some of which we take a slightly more conservative approach on in terms of loan to value ratio i.e. labour only, fixed priced/all inclusive, turnkey.
- Stability of employment and understanding the impact from COVID.
Importantly we have moved conversations for all customers commencing a build to our most experienced lenders, to ensure they get the best advice and guidance possible with their loan requirements during the building process. We understand that for some this can be more complex than simply buying a pre-existing property.
If we do have any potential clients or existing clients uncertain about how to approach their lending situation whether it’s to apply for a new loan or they are mid-flight with their build or yet to build, please encourage them to talk to their bank and their banker. Our job is to help them through this and provide the right options that can protect themselves and their family.
Amy Stewart, Head of Business Activation – Bank of New Zealand.
1)What kind of conversation can a business owner expect if they contact the bank to talk about their business?
One of the things we offer is a business health check conversation. It’s a 360-degree exploratory view of the customers business, personal financial situation, and future goals. These insights enable our Bankers to make recommendations on free support tools available through advisory networks, government backed support in the form of loans or grants and if needed, a debt solution which will support the business to reach their goals. For a number of our SME customers, the family home secures the business lending, so we take a holistic approach in our solutions to ensure the customer is doing the right thing for their business and their family.
2)Can you explain a bit about the Business Finance Scheme (BFS)?
This is why the Business Finance Scheme which is 80% backed by the government, is so exciting under the revised version 3. The scheme now supports businesses who have been impacted by Covid (positively or negatively) and has been made available to more impacted industries. This enables the Banks to provide very affordable loans (2.3%) over a 5 year term and the funds can be used to solve for a wide range of challenges for example, a decline in sales/payment collections, the need to purchase stock, pay rent, leases, support growth in a product diversification set up costs, shop fit outs, additional vehicles/assets the use of the funds are broad and are available to a wide range of industry sectors. In addition to the Business Finance Scheme, our Bankers are proactively contacting their customers to discuss existing debt structures to understand if this still meets the customers’ needs/goals and suggesting new ways of approaching their debt financing with the assistance of their advisors. The BNZ is in business to support our SME community and we will do everything we can to support our customers, new and existing, personally and/or their business to help rebuild our economy.
3)What are some of the other ways the BNZ supports business?
- Restructure debt to a low interest rate (Business Finance Scheme 2.3% p.a)
- Home Loan payment deferrals or interest only payments – for a term of 6 months
- Removed payWave fees so our merchant retailers could take pay wave payments without being disadvantaged
- Our Asset Finance package enables customers to refinance their asset finance with a variable rate of 6.95%p.a* with flexible terms to free up cashflow (*rates subject to change)
- Enable customers to apply for a loan through our website up to $100,000 without the need for additional security. Our new platform QuickBiz – it does what it says on the tin – quick business loans when you need it
- Reduced business overdraft rates by reducing the base rate by a minimum of 1%
- For trade finance customers we extended their trade credit repayment terms to help with cashflow
- Extended term lending loan repayment terms
- Using a business credit card to assist with cashflow and make payments to suppliers securely
- Providing interest only terms for business loans reviewed on the needs of the customer and on a case by case basis
- Provide free and easy to use financial planning tools on MyBusiness Live such as cashflow template, loan repayments, staff costs, break-even and margin analysis
- Finally, we have a great team of BNZ’ers who are passionate in helping their customers and understanding your business
4)What is MyBusiness Live?
In its simplest form, MyBusiness Live is a smart dashboard. It allows you to connect apps such as Xero, Facebook, shopify etc and pull key pieces of information into one place so that you can make fast decisions. By bringing accounting and banking information together you get a complete overview of your cashflow, showing insights like debtor days, next available funds, money -in and money-out.
For those who do their marketing on Facebook or Instagram, you can also connect those accounts and use google analytics to track how well that’s working for you.
Probably the most accessed area of MyBusiness Live though are the downloadable tools and templates. There’s everything from a cash flow forecast template to a business plan health check – and the list is growing all the time.
It’s free to set up an account and use the resources, and it’s bank agnostic so it doesn’t matter which bank you use, you’ll still be able to access everything on offer.