Victorian Banksia Financial Group collapse

bordsilver

bordsilver

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THOUSANDS of investors are facing hundreds of millions of dollars in losses after the shock collapse of Banksia Financial Group.

Banksia appointed receivers yesterday owing investors $660 million.

About 3000 investors in eight towns and cities in regional Victoria have had their investments frozen while receivers McGrathNicol work their way through the non-bank lender's accounts.

About 100 workers also are set to lose their jobs.

The collapse has shocked communities across the state.

Kyabram resident Jason Dunn said the town was reeling.

"People are in tears," he said.

He said many locals feared they would lose their retirement fund.

"People who worked hard all their life have just lost the lot. It's really going to affect the town. It's a black day here," he said.

Kyabram local Lynne, 50, opened up an account two weeks ago with about $8000 for a holiday.

"I'm devastated, but I got off lightly," said Lynne, who asked that her surname not be used.

"One retired lady lost the lot - $400,000. Now it has probably just gone, disappeared like that," she said.

She said Banksia was an institution that locals had trusted.

The pastor of Kyabram Baptist Church, Robert Arnold, said it was likely the church would lose money.

He said there had been no warning signs that the firm was in trouble.

"Our banking goes through them," Mr Arnold, 70, said. "It has come as a shock. I would have thought it would have been pretty well managed."

Banksia, which was founded in Kyabram, offered investment products including fixed-term, superannuation and pensioner deeming accounts and mortgage schemes.

Banksia has a network of 14 branches across Victoria, NSW and SA with headquarters in Melbourne.

Its other Victorian branches are in Echuca, Ballarat, Bendigo, Geelong, Shepparton, Tatura and Warrnambool.

McGrathNicol receiver Tony McGrath said it was too early to know what caused the collapse.

He said an urgent review of Banksia's financial position, loan book and properties was under way.

Banksia fell into receivership after a recent review of its non-performing loans.

"Our primary concern is to ensure the interests of debenture holders are being protected," Mr McGrath said.

Staff will work on during the review.

The group, which bills itself as a "non-bank alternative", was founded as Kyabram Housing Investments by Patrick Godfrey in 1968. In 1999, it merged with other small investment companies to form The Banksia Financial Group.

Mr Godfrey stepped down as chief executive in August and was replaced by Warren Shaw, a former National Australia Bank general manager in charge of overseeing its retail branches.

Mr Godfrey continues to serve as a board member.
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http://www.news.com.au/business/com...up/story-fnda1bsz-1226503478426#ixzz2AKmJybYL
 
More info here

http://www.bordermail.com.au/story/422319/rural-savings-threatened-after-collapse/?cs=12

As a non-bank lender, Banksia offers investors high interest on debentures and the lends these funds out as mortgages or commercial property loans. Given Banksia does not hold a banking license, the funds in the debentures are not backed by a deposit guarantee.

Debenture firms often target retirees as investors, generating new business through promises of high interest returns backed by property.
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McGrathNicol's appointment was triggered by Banksia launching a review of its lending book. Early figures from the review presented to the board yesterday indicated a sharp jump in provisions needed to cover bad loans. The steep losses were likely to lead to Banksia having "negative net equity", it told debenture holders ahead of the appointment of McGrathNicol.

At the end of June, $65 million worth of loans made by Banksia were overdue, according to the company's financial accounts. In addition, it had seized property against which it had loaned $74.5 million.
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"Given Banksia does not hold a banking license, the funds in the debentures are not backed by a deposit guarantee."

I wonder how many were actually aware of this and assumed that it's a bank given their misleading name with the word in it.
Do they they inform the customer at the beginning or let them figure it out themselves?
 
goldpelican said:
Given Banksia does not hold a banking license
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I note that they got around the restriction of the use of the word "Bank" in a business name...
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:lol: Can picture it at court - "We named ourselves after a popular native flower the "bank" connotation was completely incidental you honour."
 
Big Banksia building here in Ballarat.

There will be many affected locals. Lots of retirees chasing higher returns than the Big 4 will have their well laid plans in tatters.

Their ads have always had the disclaimer that you could lose some or all of your investment so at least they were being upfront about it.
 
so what did banksia do?
were they a fund which invested/traded people's money
or did they just lend out money with interest
or both?
 
Eureka Moments said:
Their ads have always had the disclaimer that you could lose some or all of your investment so at least they were being upfront about it.
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And if anybody was stupid enough ______________________ :rolleyes:
 
Flow on effects will hurt several country communities.

All branches are locked and Im sure there will be many business people and their employees with suddenly unknown futures.

Lots of self-funded retirees have become instant centrelink recipients just in case anybody thinks this doesnt have flow on effects for the rest of us.
 
nowaydude said:
so what did banksia do?
were they a fund which invested/traded people's money
or did they just lend out money with interest
or both?
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It will be very interesting to find out. On the face of it I find the "negative equity" comment rather than insolvent strange and indicates something dodgy.

Anyone who finds updates should post please.
 
Will labor bail them out like their public servant mates in qld, I thinketh not
 
No-one knows the extent of losses yet - there could be $500m left to distribute etc (just a random number plucked from the air).

News tonight is saying 8 weeks and debenture holders will start getting some returns, but there will be some capital losses.

I think the bigger unspoken story here is the fate of all of the mortgage holders who bought residential, rural or commercial property with loans from this entity - I suspect there are going to be a lot of debts called in and that's probably going to hurt more than the debenture holders who lose some of their investments.

"Hey, you gave us $100k, here's $50k back."

"Hey we loaned you $100k, pay NOW. You can't? Thanks for the house."
 
Some of these people though, with "life savings" invested in companies like this.

It's an INVESTMENT, there's RISK.
 
goldpelican said:
No-one knows the extent of losses yet - there could be $500m left to distribute etc (just a random number plucked from the air).

News tonight is saying 8 weeks and debenture holders will start getting some returns, but there will be some capital losses.

I think the bigger unspoken story here is the fate of all of the mortgage holders who bought residential, rural or commercial property with loans from this entity - I suspect there are going to be a lot of debts called in and that's probably going to hurt more than the debenture holders who lose some of their investments.

"Hey, you gave us $100k, here's $50k back."

"Hey we loaned you $100k, pay NOW. You can't? Thanks for the house."
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I've just been talking about the same thing with someone. If mortgage holders cant get refinanced their home gets firesaled and they are left with any leftovers.

Not sure how much of this is related to mortgages though. Most of the PPOR buyers have loans with the Big4. Bad debts and loans may be more likely to be related to investment properties and commercial developments IMO.

Even if they get $500 mill back after legal fees, sundries, royal commissions and charges that will be reduced to next to bugger all. Pyramid took over 10 years to resolve and people ended up getting bugger all.
 
RetardedMonkey said:
Some of these people though, with "life savings" invested in companies like this.

It's an INVESTMENT, there's RISK.
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They had really nice prospectuses and good returns for more than 40 years. Many people would have done ok investing with them over the years. Many would be the same ones losing now. Long termers who thought they were all good getting higher returns than others.

Lack of diversification sticks out as a major lesson, but I reckon as people age they tend to concentrate rather than spread their investments which is why large slabs of peoples portfolios will be lost. Lots of these people will own their PPOR but will be suddenly asset rich and cashflow poor.
 
Some more details...

http://www.weeklytimesnow.com.au/article/2012/10/26/546817_latest-news.html

Quotes from article:

Kyabram accountant Peter Nelson said he's hopeful he and other investors - from retirees to schools and sports clubs - may get a reasonable share of their cash back because Banksia's advances are secured by first-ranking property mortgages.

"Unless there's some real bodgies in (Banksia's accounts), we'd be hopeful something will come out in the wash," he said.
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Murray MP Dr Sharman Stone said the Banksia news had shocked the community.

"Unfortunately, many in the Kyabram community in particular felt that they were investing their money back into their home community by investing in or borrowing from Banksia," Dr Stone said.
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In an email to mailing list subscribers financial columnist The Barefoot Investor Scott Pape said he was not shocked to learn Banksia had gone into receivership.

"Groups like Banksia advertise on telly promising a guaranteed 9 per cent return, 'backed by bricks and mortar'.

"But what's really going on is that Banksia will take your money and lend it out (at rates as high as 14 per cent) to property developers who can't get a loan from a bank - and Banksia of course keeps the difference.

"Developers can't sustain these rates and go to the wall. (I mean, if the banks wouldn't lend to them, why would you?)

"And so groups like Banksia often end up going broke too.
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ASICs role as a regulater has also been questioned by some.
 
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