Friday, February 23, 2024

Agri debt starts to grow again

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Quarterly results show signs of a turnaround after three years in slow decline.
Rabobank NZ chief executive Todd Charteris says the sector faces numerous challenges but the long-term prospects are positive and Rabobank will keep lending to farmers, growers and support businesses.
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Lending to agriculture has shown a three-year slow decline, down from a peak of $63.86 billion in July 2019 to $62.14b in July this year.

But there are signs that the negative annual growth rate may be slowing as total lending to the sector grew slightly in the most recent three months reported by the Reserve Bank of New Zealand.

April bottomed out at $61.44b, followed by May on $61.62b and June on $61.95b.

Thus, while the annual growth rate may still be negative, the month-on-month numbers have turned positive.

RBNZ statistics and graphs show three different periods of lending growth to agriculture in the past 25 years.

In the early 2000s the annual growth rate went as high as 20%-plus, peaking in 2002 and again in 2008, and averaging around 15% for the decade.

In the 2010s the annual trend dipped into minus territory around 2011, then recovered to average about 4% through until 2019.

Since then the rate has been negative since April 2020 as dairy farmers in particular repaid loans from good farmgate milk prices.

In the June 2022 quarter ANZ Bank continued to have the largest slice of lending to agriculture, with $15.35b, or 24.7% of market share.

BNZ followed with $12.89b or 20.8%, Rabobank with $11.87b or 19.1%, ASB with $10b or 16.1% and Westpac on $9.19b or 14.8%.

The remaining 5% of total lending is split between Kiwibank, Heartland Bank, TSB, SBS, and ICBC (Industrial and Commercial Bank of China).

Small movements in agricultural lending over the previous 12 months (June 2022 figures compared with June 2021 figures) show ANZ has lost 1% market share and most of that has gone to Rabobank, with a little to BNZ.

For ANZ that was a reduction in its loan book of $680 million and for Rabobank it was a gain of $520m.

Because Rabobank has made 95% of its total lending to agriculture and horticulture, exposed to adverse weather and commodity markets, its ratio of non-performing loans is 1.3%.

The four big trading banks, with massive loan books in housing, have non-performing ratios between 0.3% and 0.4%.

Rabobank NZ chief executive Todd Charteris said the healthy portfolio growth in recent years is in line with the bank’s strategy and demonstrates an ongoing and consistent commitment to the food and agribusiness sector.

The sector faces numerous challenges but the long-term prospects are positive and Rabobank will keep lending to farmers, growers and support businesses, Charteris said.

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