Business lending slumps in April, but farm and housing lending up

Banks are reverting to a deep conservatism that values residential and farm land as much better security than anything offered by businesses, the latest Reserve Bank statistics for bank and non-bank lending in April show. These figures show banks are withdrawing loans from businesses as the recession drags on, despite signs many have cash-flow problems and need to surmount their own credit crunches to avoid job losses. Meanwhile, banks continue to pump cash into sectors that the Reserve Bank has warned are over valued and vulnerable to price falls. Bank lending to business fell NZ$712 million in April from March and is now up only 6.8% from April a year ago. Farm lending is up 21% from a year ago and housing lending is up 2.9% from a year ago. Over the calendar year so far, bank lending to businesses has contracted NZ$1.777 billion or 2.2% to NZ$78.493 billion. Meanwhile, bank lending to home owners and farm owners is ticking along solidly. Banks lent an extra NZ$488 million to home owners in April from March and lent an extra NZ$335 million to farmers. Total lending to housing has risen NZ$1.897 billion to NZ$163.456 billion in the last four months, while lending to farmers has risen NZ$1.603 billion to NZ$45.049 billion over the same period. Total bank and non bank lending overall rose just NZ$16 million to NZ$299.690 billion in April from March and is up NZ$1.492 billion since December.

The overall picture is that banks and non-banks are contracting lending to businesses, while extending loans to farmers and home owners. Consumer loans, which includes personal, hire purchase and credit card lending, fell NZ$95 million to NZ$12.692 billion as retail spending contracted. Consumer lending is down NZ$231 million since December.