By Gareth Vaughan
Rural lender Rabobank New Zealand, whose exposures include a loan to the in-receivership Crafar Farms, recorded a NZ$168.2 million, or 79%, jump in impaired assets in the year to September.
The bank's General Disclosure Statement for the nine months to September 30, 2010 shows "other individually impaired assets" of NZ$382.2 million at September 30, up from NZ$214 million a year earlier. Rabobank booked NZ$29.6 million of impairment losses on loans and advances during the period, down from NZ$43.7 million in the nine months to September 2009.
Rabobank's total loans and advances, with the vast bulk to the agriculture, forestry, vita culture and fishing industries, stood at NZ$7 billion at September 30, up from NZ$6.5 billion a year earlier and up from NZ$6.9 billion at June 30 last year. Total assets rose to NZ$7.1 billion at September 30 from NZ$6.8 billion a year earlier.
The bank's rural exposures include a loan to the Crafar Farms. Just before Christmas the Government blocked a bid by Natural Dairy to buy 16 Crafar farms on 'good character' grounds, as well as blocking a retrospective bid by sister company UBNZ Assets Holdings, which bought four other Crafar farms last February. The Crafar Farms were dumped into receivership in October 2009 owing about NZ$216 million to lenders Westpac, Rabobank and PGG Wrightson Finance after interest.co.nz revealed animal welfare issues at the farms.
Interest.co.nz understands PGG Wrightson Finance's Crafar exposure is about NZ$8.6 million, leaving the balance with Westpac and Rabobank. PGG Wrightson Finance CEO Mark Darrow told interest.co.nz last year his firm had provided against its Crafar exposure but Rabobank declined to comment.
Rural debt concerns
Rabobank's increase in impaired assets comes as concern about rural sector debt levels rumble on. The Reserve Bank warned in last November's bi-annual Financial Stability Report that farm prices might need to continue falling to see “substantial” buying interest re-emerge and also warned that further falls could see some dairy farmers, who took on debt to expand during the boom times, slip into negative equity.
The central bank said farm prices had fallen by about 15% from their mid-2008 peak by the end of 2009. Prices appeared to have fallen even further throughout 2010, but given the extremely low volume of farm sales, the current level of farm prices was “highly uncertain.” The Real Estate Institute of New Zealand said last month that the national median farm sale price rose to NZ$968,500 in the three months to November 2010 from NZ$950,00 in the three months to October. This is a 10% increase from the median of NZ$880,000 for the same period of 2009, but well below the median of NZ$1,542,750 for the equivalent period in 2008.
A total of 71 farms changed hands during November last year, up from just 46 in October and 69 in November 2009.
Meanwhile, real estate agent First National said in December its agents were reporting a significant number of farmers, whose banks helped them through last spring, could go to the wall in coming months as anticipated production fails to materialise leaving them struggling to cover additional debt incurred.
Rabobank said its interest forgone on non-accrual assets in the nine months to September was NZ$23.8 million, almost double the NZ$12.4 million in the same period of 2009.
Rabobank, whose RaboDirect (formerly RaboPlus) unit has offered term deposit rates among the most competitive in the market over the past year, said deposits rose to NZ$2.5 billion at September 30, up from just under NZ$2.2 billion a year earlier. See all term deposit rates and debenture rates from 1 year to 5 years here and see all term deposit rates from 3 months to 9 months here.
Meanwhile, Rabobank New Zealand - ultimately a subsidiary of Dutch cooperative Rabobank Nederland - posted total comprehensive income after tax of NZ$47.8 million for the nine months to September, more than double the NZ$17.9 million recorded in the same period of the previous year. This was boosted by a NZ$19.7 million rise in net interest income and the release of a NZ$9.6 million provision for risk compared to a NZ$8.6 million charge for risk in the same period of 2009.
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