Big four's $107b farming debt

10 Nov, 2014 04:45 AM
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9
 
Low interest rates, cheaper land and a falling dollar have made some expansion plans worth pursuing

AUSTRALIA'S big four banks have increased their exposure to farming to more than $107 billion, with National Australia Bank still dominating the market.

Despite major farm debt issues facing Australian producers, in particular those in northern Australia, low interest rates, cheaper land and a falling dollar have made some expansion plans worth pursuing.

Land purchases make up the major component of farm debt.

Overall, NAB's total agricultural exposure grew to $38.1 billion in September 2014, up from $37.2 billion in September 2013. Specifically in Australia, its exposure grew to $20.5 billion up from $20.3 billion.

However, in the beef sector where Australia's farmers have been hit hardest, the bank reduced its exposure to $3.48 billion from $3.65 billion.

The bank has seen several major cattle stations placed in receivership and sold off including most recently a station, Corfield Downs, north-west of ­Longreach which sold for about half of what it was bought for during the boom time.

The bank has roughly 1 per cent of its agricultural loans – or about $380 million – unsecured, however it continues to dominate market share with 22.3 per cent of lending up from 22.1 in September last year.

The bank now has 600 specialist agri bankers across Australia and the agribusiness division is seen by the bank as a more attractive customer segment than the banks' $59.1 billion commercial real estate division. The bank was unavailable for comment.

Westpac's exact figures were not made available but the bank said its exposure had grown to more than $20 billion.

Agricultural lending ahead of system growth

Its agricultural lending in Australia was well ahead of system growth and about twice that of system growth in New Zealand. Westpac's general manager for agribusiness Stephen Hannan said further growth was anticipated.

"We are already seeing promising signs of growth at the farm gate in this new financial year," he said. "With a quality book and our customers in good shape we believe there are further opportunities ahead for them and the industry in the year ahead."

Westpac's stressed exposures have also declined in agriculture to just below $1 billion down from about $1.25 billion this time last year.

ANZ's exposure in agriculture as of September 2014 fell to 3.9 per cent of total exposure at default, down from 4.3 per cent a year earlier.

The bank's banks total exposure at default in the September quarter was 796 billion.Non-performing loans

The bank's percentage of non-performing loans within its agricultural exposure has dropped from 4.1 per cent to 2.5 per cent as of September 2014.

CBA's exposure to agriculture as of June 2014 was $17.9 billion, up from $17.3 billion in the previous ­­corresponding period.

The CBA's most recent results show that of the $17.9 billion in exposures none are rated AAA to AA– and only $500 million sit within the A+ to A- rating while $2.1 billion sit between BBB+ and BBB-.

CBA's Bankwest arm has had several farms in receivership including six holdings once owned by KM ­Cattle Company.

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READER COMMENTS

Xa Socialist
10/11/2014 5:49:11 AM

I am with the best bank, Rabobank, although I have no idea how big it is.
GFA
10/11/2014 8:07:03 AM

The Banks must have a vested interest in Farm Gate profitability improving with such exposure and with such low levels of ratings for their investments. When will they start urging Government to address the imbalance between costs of regulations on the farm sector and exposure to globally open and corrupted markets reducing incomes? It is well past the time when Australian business can survive under such madness, with business being made to pay for whole of Government Welfare under the cover of Industrial Award Regulations! Add to that environmental regulations.
Deregul8
10/11/2014 12:48:49 PM

The main reason I'm with Rabo is they have limited exposure to a likely housing bust. I'm just not so sure, there can't be a farmland price bust with the level of debt overhanging the market also. There really is nowhere safe to hide from a full blown credit crisis other than to manage debt levels carefully.
John Niven
10/11/2014 6:28:12 PM

How silly are we. ??
MarkR
10/11/2014 11:24:08 PM

Thank you Matthew. Can Aussie farm debt really be AUD$107bn, when ag production is only $20-30bn (?) (imhi)?
LTF
11/11/2014 7:58:02 AM

MarkR, just shows you how much money is on loan against asset value versus annual income eh? Also shows you how much of the farm and equipment the Banks own and how much we don't eh?
stockman
11/11/2014 5:09:23 PM

Looking at farm forclosure history there is no way I would borrow money from the NAB.
genazzano
4/12/2014 8:17:12 AM

According to the RBA, our banking system holds $21.5 Trillion in “Off-Balance Sheet” derivatives exposures: Because for the bankers, propping themselves and their compadres up is all that matters. What we call “theft”, they call “ensuring financial system stability”
genazzano
4/12/2014 12:11:08 PM

Small sum when compared to According to the RBA, our banking system holds $21.5 Trillion in “Off-Balance Sheet” derivatives exposures: Because for the bankers, propping themselves and their compadres up is all that matters. What we call “theft”, they call “ensuring financial system stability”

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