By Gareth Vaughan
Specialist rural lender Rabobank New Zealand's lending growth slowed in the December quarter and profit also fell as expenses and impairments rose.
Rabobank's General Disclosure Statement (GDS) for the three months to December 31, 2011 shows gross loans and advances rose NZ$26.778 million to NZ$7.893 billion from NZ$7.866 billion at September 30. That's down from growth of NZ$422.254 million in the three months to September last year and compares with growth of NZ$156 million in the December quarter of 2010.
Rabobank accounted for nearly 65% of new lending to the New Zealand rural sector in 2010 according to KPMG's 2011 Financial Institutions Performance Survey Review. Rabobank's GDS shows almost 95% of its total credit exposure is in the agriculture sector.
Meanwhile, Rabobank's December quarter net profit after tax fell NZ$8.9 million, or 37%, to NZ$15.2 million from NZ$24.2 million in the three months to December 2010. The profit drop came with impairments NZ$3.6 million, or 70%, higher at NZ$8.7 million, and operating expenses up NZ$5.4 million, or 25%, to NZ$27 million.
Across the full 2011 year, the fee Rabobank pays the Australian branch of Rabobank Nederland - for administrative and management services - rose NZ$4.6 million to NZ$42.3 million. Also rising was the annual personnel expense, up NZ$7 million to NZ$30.8 million. Rabobank's annual profit after tax fell NZ$18.1 million, or 25%, to NZ$53.8 million.
December quarter net interest income rose NZ$488,000 to NZ$56.7 million and total operating income fell NZ$6.6 million, or 10%, to NZ$57 million.
Total deposits fell in the quarter, by NZ$115.1 million to NZ$2.96 billion.
Total assets and total liabilities were also down, by NZ$96.5 million to NZ$7.86 billion, and by NZ$111.8 million to NZ$7.2 billion, respectively. Total impaired assets stood at NZ$395.7 million at December 31, down NZ$4.9 million year-on-year. Assets at least 90 days past due fell NZ$3.3 million year-on-year to NZ$64.6 million, but were up NZ$10.5 million from September 30.
Among Rabobank's rural exposures is what's described as a disproportionate one to the wine sector by Deloitte partner Paul Munro, who authors the accounting firm's annual wine sector survey. In December the bank pulled the plug on Sedgebrook Estate, after it breached loan terms. Insolvency specialist McDonald Vague was appointed receiver with Rabobank owed NZ$3.9 million.
Rabobank's tier one capital ratio rose to 7.67% at December 31 from 7.31% at September 30, and its total capital ratio rose to 11.13% from 10.96%. The Reserve Bank mandated minimums are 4% and 8%, respectively.
A recent seven-year retail bond offer by Rabobank raised NZ$250 million, paying investors' interest of 6.10% per annum. Rabobank lost its prized AAA credit rating from Standard & Poor's last November, being downgraded two notches to AA as S&P revamped the way it does its ratings. However, at AA, Rabobank still has a higher credit rating than the big four Australian owned banks - ANZ NZ, ASB, BNZ, and Westpac NZ - plus Kiwibank, which are all now at AA-.
See Rabobank's bond issuer page here.
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3 Comments
Follow the money ....
1. Interest costs have gone down, but loan rates stay the same.
2. $400m of impaired assets (this is the bucket they have identified, but do not want to write off) and could be written back to profit if conditions improve.
3. The impairment losses have been sort matched by the increased interest rate margin (they almost made a loss in 2009.
4. The parent/someone invested a further $300 as equity in 2010 (see above).
One would consider the headroom avaliable for loan write downs....
and the quality of the Total Assets number (would any farm values be at of about the $ amount of the loan outstanding?)
Imagine what happens if credit growth stops.
Table Below ex the Rabo GDS....
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