THE fastest rise in the Official Cash Rate in history has pushed rural borrowers and their bankers into a very challenging set of circumstances, ASB general manager, rural, Aidan Gent says.
From the bottom of the OCR four years ago until now there has been a 4.5% increase and the financial markets have priced in at least one more hike before February.
Banks are required to hold more capital against a farming loan than a housing loan, hence the differential interest rates, Gent says.
They are helping their farming customers, where possible, to cope with rising interest rates, on-farm cost inflation impacts and falling commodity prices.
“History tells us that high inflation is very hard to get on top of, and that it is always darkest before dawn,” Gent says.
“Those businesses that control their costs very well, and optimise the drivers of cash flow, will come out of the downturn more quickly.”
From the end of this financial year banks will be required by the Financial Markets Authority to report on the farm emissions and reduction plans of their customers.
Farmers need to know their numbers and their relation to productivity in kilograms of milksolids, fruit or meat and wool.
“The drivers of sustainability are the same as those of productivity and financial results.”
Gent has a Bachelor of Commerce from Auckland University, as he wanted to stay within driving distance of the family farming activities back in Ruawai, on the Kaipara harbour, Northland.
His father, Greg Gent, has held high-level governance positions for the past 30 years and mother Ann Flood is a Kaipara stalwart who dairy farmed on her own account before marrying.
Within the family succession plan Aidan has one-third ownership of a 400-cow dairy farm and tries to get back there as often as possible to “milk cows and drive tractors”.
His enjoyment of outside work includes operational management of this shared-ownership dairy farm, run by a very good lower-order sharemilker.
Gent was a Young Farmer Contest grand finalist for Northern region in 2009.
Coming up to two years with ASB, he has 14 years’ experience in banking, having worked in Canterbury, Taranaki and Australia before returning to Auckland and Northland.
ASB has a rural workforce of close to 170 people spread throughout the country.
Its most recent market share of primary sector lending is 17% and Gent says ASB’s growth in the past year was three times that of the sector growth rate as a whole.
ASB puts effort into recruiting graduates by attending university careers opportunities and making sure that people know the number of ways they can enter the food and fibre industries, he says.
The reputation of ASB in the primary sector is strong and its market share is consistent across the regions, he says. The proposition to farmers rests on the quality of the rural bankers and their interactions and upon ASB’s longevity and its confidence through economic cycles.
Formed in 1846 by pioneers like Sir John Logan Campbell, ASB has always catered for farming, including ownership since 1933 of the 8ha Mt Albert Grammar farm, which it gifted to the school last year.
It sponsors Rural Support Trusts and the Dairy Women’s Network nationally along with many regional organisations and events.
ASB also backs Youthline, which provides real help to rural people struggling with mental health.
“We have funded extension of the times Youthline is able to take calls and we know that rural people are users because of their locations.”
Support of St John Ambulance fits rural people in the same way, he said.
Gent is certainly energised by the role to which he has been recently appointed and the cyclical circumstances.
“Our role is to help customers understand and manage the risks in their business.
“Rural banking 10 years ago is very different to today.
“We now talk to them about their farm emissions and their plans for reducing or mitigating those emissions.
Most farmers now have a group of rural professionals around them who need a deep understanding of the business, the platform and the requirements.
“How do we view these requirements as an opportunity, to set your business up to be more successful in five or 10 years?
“To be trusted advisers we need to spend more time with farmers.
“In days gone by rural bankers coming up your driveway wasn’t always a good thing, but now more face-to-face meetings help add value to the relationship and to the customer’s business.”
Gent was asked about the tenor of the relationship, as perhaps banks could be viewed as part of the burden of regulations.
“No one person is the author of these requirements, which are ultimately requested by the people who buy our products and invest in our businesses through bank deposits.
“But how some of these have been implemented have made it more challenging on farm, without alignment.
“Farmers have spent decades adapting and evolving on the basis of consumer expectations and they will do so again.”
When farmers have moved through the near-term lump of requirements that have come at once, that will be a platform for growth and opportunity, he says.
Dairying tends to get the spotlight, the statistics and the analysis, but Gent says sheep and beef farmers face more change over a shorter period.
“Farmers in that industry don’t have the scale and the sector knowledge and advice networks.
“Yet the sustainability opportunities, especially for wool, are greater.”
“The best use of some land might not be for animals, and the integration of dairying and beef has potential for reducing emissions intensity.”