By Gareth Vaughan
Rural lending specialist Rabobank New Zealand saw its profit more than double in the June quarter as income rose and impairments moved out of the red and into the black. This came as the bank grew gross lending by 1.3%, well shy of its 6.75% increase in deposits.
Figures taken from Rabobank's latest General Disclosure Statement (GDS) show unaudited profit after income tax up NZ$15.6 million to NZ$27.3 million in the three months to June 30 from NZ$11.7 million in the same period of 2011. The profit rise was driven by 18% and 15% rises, respectively, in net interest income and total net operating income. Operating expenses rose just 8% and there was NZ$5.75 million worth of releases on loans and advances recorded, in contrast to NZ$8.9 million of impairments in the June quarter last year.
Rabobank's gross loans and advances rose NZ$102.3 million, or 1.3%, during the three months to June 30 to just over NZ$8 billion. This was well behind the pace of the bank's deposit growth, which including deposits with online unit RaboDirect, rose NZ$193.3 million, or 6.75%, to just over NZ$3 billion.
Reserve Bank sector credit data shows agriculture debt up NZ$786 million, or 1.65%, in the June quarter to to NZ$48.338 billion suggesting Rabobank got about a 13% share of new lending. In the year to June the sector credit data shows agriculture debt rose 3.2%, well below Rabobank's 8.3% increase in gross lending that saw its overall loans increase by NZ$614.8 million year-on-year.
June quarter net interest income at Rabobank increased NZ$8.7 million to NZ$56.9 million and total net operating income rose NZ$7.6 million to NZ$57.1 million. Operating expenses rose NZ$2 million to NZ$26.2 million as a management fee charged to Rabobank NZ by a related entity, the Australian branch of Rabobank Nederland, rose NZ$1.4 million over the six months to June, or 9%, to NZ$16.8 million.
Individually impaired assets rose NZ$17.7 million to NZ$409.2 million as 90 days past due assets fell NZ$12.8 million to NZ$56.2 million. Rabobank's total assets surged NZ$785.8 million to NZ$8.7 billion, helped by a big rise in available for sale financial assets such as New Zealand government securities, assets due from related entities such as short-term advances, and the loan growth. Total liabilities rose NZ$758.9 million to NZ$7.9 billion, boosted by the deposit growth and liabilities due to related entities like short-term advances.
Total equity at Rabobank NZ rose NZ$26.8 million, bolstered by retained earnings, to NZ$738.8 million. As with the June half-year last year, no dividend was paid to ultimate parent Rabobank Nederland, a Dutch cooperative.
Meanwhile, Rabobank NZ's tier one capital ratio, representing shareholders' funds in the bank, rose to 7.83% at June 30 from 7.31% at March 31. The bank's total capital ratio rose to 11.18% from 10.95%. The Reserve Bank mandated minimums are currently 4% for the tier one ratio and 8% for the total capital ratio.
See our story based on Rabobank NZ's March quarter GDS here and the one on the June 2011 quarter here.
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5 Comments
The profit rise was driven by 18% and 15% rises, respectively, in net interest income and total net operating income. Operating expenses rose just 8% and there was NZ$5.75 million worth of releases on loans and advances recorded, in contrast to NZ$8.9 million of impairments in the June quarter last year.
We all want our banks to be profitable, but not to the point that the profits are glaringly obscene and when they are obviously dipping deeply into the pockets of both borrower and depositor alike.
Do we not have regulators to oversee and control this type of gouging? - didn't the economy grow a piddling 1.1% in the March quarter with not much chance of anything significantly higher in following three months.
Statistics New Zealand said the Consumers Price Index (CPI), a measure of general price levels in the economy, rose 1.0% from the June 2011 quarter to the June 2012 quarter, following a 0.3% rise in the the CPI in the June 2012 quarter from March. That meant annual inflation was right at the bottom end of the central bank's target band.
Thus no chance of inflation softening the blow to over indebted and certainly overcharged farm borrowers.
As for depositors they might as well just hang themselves because they will have to wait forever before the RBNZ acts to increase their share of the returns.
Good question.
The answer is 'No'.
Did you hear Mora/BH this afternoon? Apparently you have to be a trained journalist, and the essence is that you set up a 'he said/he'said' scenario, and hey presto, you're 'balanced'. Ryan does this with 'From the Left, From the Right'.
No good if your perception falls short of one end or the other, of the total spectrum. Your 'balance' must also fall short (although I guess you could argue you've halved the error....)
Deposit growth at 6.75% is below the market growth rate of 10%, therefore Rabobank is losing market share.
This is not surprising given their continued attack on their existing customers refusing to allow them access to the savings account special offer (for existing funds). And the offer right now is only for new customers.
As a Rabo customer I can get much better savings account deal at several of the so-called 'greedy banks'. Looks like you can make any claim you like in advertising these days with total impunity.
Perhaps Melanie Templeton could heed her own advice about being more transparent with savings accounts.
I'm voting with my feet.
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