By Gareth Vaughan
A drop in non-interest income, rise in impairment losses on loans and increase in operating expenses, have combined to cut rural lender Rabobank's March quarter profit by 36%.
Rabobank's General Disclosure Statement (GDS) for the three months to March, shows profit after tax of NZ$13.3 million, down NZ$7.6 million from NZ$20.9 million in the same period of last year. The profit drop came as non-interest income fell NZ$6.3 million into the red from income of NZ$600,000 in the March quarter last year, and impairment losses rose to NZ$4.9 million from NZ$500,000. Meanwhile, operating expenses rose NZ$3.1 million, or 19%, to NZ$19.6 million.
Although the lender's capital dropped NZ$26.4 million in the March quarter to NZ$907.6 million, Rabobank bolstered its funding through a NZ$250 million issue of seven-year floating rate notes in April and a NZ$100 million issue of seven-year bonds to retail investors in May. Dutch parent Rabobank Nederland injected NZ$300 million of tier 1 capital last year and NZ$300 million of tier 2 capital to support further New Zealand growth.
Rabobank New Zealand general manager Ben Russell told interest.co.nz earlier this year that the bank was actively looking to lend money to farmers who want to buy farms but was warning potential buyers not to expect any short-term capital gains.
Rabobank recorded a NZ$3 million, or 6%, rise in net interest income to NZ$49.3 million. Interest income rose NZ$4.5 million, or 4%, to NZ$121.6 million and interest expense rose NZ$1.5 million, or 2%, to NZ$72.3 million.
Rabobank increased lending by about NZ$47 million during the quarter to NZ$7.081 billion and total assets by NZ$183 million to NZ$7.361 billion. Deposits increased NZ$55 million to NZ$3.224 billion.
Meanwhile, individually impaired assets lifted NZ$8.7 million to NZ$399.5 million and 90 day past due assets dropped NZ$19.5 million to NZ$56.5 million.
Rabobank's quarterly profit drop comes after the bank posted a more than eight-fold rise in 2010 annual profit to NZ$71.9 million after a big drop in provisions for bad loans.
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