Rabobank New Zealand Group posted a 73% jump in annual profit as income surged, the bank was able to release impairments, and lending grew.
The specialist rural lender's net profit after tax rose $88 million to $209 million in 2021 from $121 million in 2020.
The increase came as net interest income rose $42 million, or 11%, to $416 million, and total operating income increased $91 million, or 26%, to $435 million.
Impairment releases of $27 million compared to impairment losses of $16 million in 2020.
Operating expenses rose $11 million, or 7%, to $172 million.
Rabobank NZ CEO Todd Charteris says impairment releases and lower funding costs boosted profit.
“In 2020 we booked a number of Covid-related impairments which contributed to our 2020 net profit after tax dipping below the previous year’s result. The strong commodity pricing over the course of 2021 saw a number of our clients paying down debt which improved the risk profile of our portfolio and enabled us to unwind loan impairments from the previous year,” Charteris says.
He attributes higher expenses largely to increased staff numbers, especially in the bank's compliance and regulatory teams.
Rabobank says it recorded annual net lending growth of $636 million with lending inside the farm gate rising 2.7% when system-wide rural debt dropped 1.2%. Gross loans rose to $14.8 billion from $14.2 billion.
“We remain positive about the long-term prospects for the [rural] sector and our intention is to further expand our agri lending portfolio through new lending to farmers and other businesses across New Zealand’s food and agribusiness supply chain," Charteris says.
Meanwhile data reported to the Reserve Bank's Bank Financial Strength Dashboard shows Rabobank's non-performing loan ratio down to 2.2% at December 31 from 3.5% a year earlier. Total non-performing loans fell to $323 million from $500 million. And loan provisions of $25 million compared to $60 million a year earlier.
Total deposits dropped $189.427 million, or 3.3%, year-on-year to $5.543 billion driven by a $254 million drop in term deposits to $2.767 billion.
The bank's Common Equity Tier 1 capital ratio, as a percentage of risk weighted exposures, was at 14% at December 31.