Saturday, December 2, 2023

Banks cut back on rural staff

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The Australian-owned banks are slimming down their rural lending divisions as doubt continues to swirl around their commitment to New Zealand’s $63 billion rural lending market.
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The country’s third largest rural lender, ASB, is restructuring its rural lending team.

As many as 15 of its rural loan managers out of a total of 60-70 are understood to be for the chop. Another 15-20 support staff also face redundancy or redeployment.

Meanwhile, the other Aussie banks are not replacing rural managers when they leave.

An ASB spokeswoman said the bank has been lending to farmers for 25 years, remains committed to the NZ market and continues to lend to new and existing customers.

“At the same time our customers are changing and in response to this we need to change as well to ensure we keep delivering for them.

“As a result we have been making some adjustments to our business model and to some of the roles in our rural team.”

The final number of redundancies has not yet been settled.

She denied a connection with confirmation of new capital rules by the Reserve Bank last month.  

Over the next six years the trading banks will need to find $20b to double the amount of capital they hold to help withstand a one-in-200 economic shock.

Australian banks are under even more pressure with their own regulator in August announcing restrictions on the capital they can pump into their NZ subsidiaries to meet the new requirements.

One former rural banker said headcounts are being reduced to lessen the impact on bank profits of the new rules and ahead of an expected tightening in credit.

Capital-hungry rural lending is seen as particularly vulnerable to a credit squeeze.   

“They have basically realised that in a market where growth isn’t really a strategy they are terribly excited about executing they are overleveraged,” he said.

Latest Reserve Bank figures show lending to the rural sector is falling.

After peaking at $63.9b in July agricultural lending has fallen every month since to $63.4b in October before recovering slightly in November to $63.5b.   

Annual lending growth to the end of November was the lowest since 2012.

Most of the banks have so far been able to hold off on pulling the trigger on redundancies by not replacing employees as they leave.

That is being made easier as increasing numbers are opting to take early retirement or other jobs rather than stick around for the unpleasant task of getting tough with borrowers.

“Some of them are just quitting because they have had enough,” another former banker said.

“A lot of them have gone to run farms or gone to work for former clients.”

Some have jumped ship to Rabobank, which is hiring rather than firing rural managers.

It is understood the BNZ has lost at least one major account manager in the South Island to the Dutch-owned lender in the past few months.

Rabobank is the fourth-largest rural lender behind the ANZ, BNZ and ASB with $10.6b of loans.

A spokesman said it has hired a small number of new bankers to support lending growth.

“It is our intention to further expand our team over coming years to support this growth.”

Also unknown is how many former bankers are working for foreign investment funds now circling the rural debt market.

Merricks Capital last month launched its NZ business with the $140m refinancing of bank debt owed by South Island dairy farming conglomerate the Van Leeuwen Group.

The Sydney-based fund manager expects up to $10b of farm loans will be shed by the trading banks over the next five years as a result of the new capital rules.

It is targeting up to $2b of those loans, which, it said, will be managed by local employees and its own staff flying in from Australia.

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