BNZ chief Healy sees growth in rural, business lending

Thursday 30th October 2014

Bank of New Zealand chief executive Anthony Healy expects the broader rural sector to continue to grow with greater investment along the value-chain, and anticipates increased business lending after a period of low credit expansion.

The New Zealand unit of Australia's National Australia Bank increased gross loans 4 percent to $63 billion in the 12 months ended Sept. 30, which Healy said was due to a strong performance from its agribusiness unit, which has been a focus for BNZ over the past three years, and growth in residential mortgage lending. Healy told BusinessDesk rural lending had remained strong, and was supporting new investment along the value chain.

"Our view remains very positive on the agri and rural sector," Healy said. "We're seeing continuing trends around consolidation, corporatisation and a lot more producers investing more and more down the value chain."

More investment is happening "post farmgate as New Zealand thinks about adding more value to our commodities," he said.

BNZ today reported a 2.4 percent increase in annual cash earnings to $805 million on a 3.1 percent lift in net interest income to $1.51 billion. Statutory net profit, which includes movements in the value of financial instruments and incorporates wholesale operations reported in NAB’s Australian banking unit, rose 22 percent to $850 million.

Healy said the recent fall in global milk prices will make things a bit tougher for the dairy sector in the coming year, though many farmers had used the record high prices of last year to cut down debt, with the level of debt per kilogram of milk solids reducing to $17 from $21.

Small and medium sized enterprises had also gone through a period of deleveraging, though Healy said there were signs of strengthening credit growth in that sector. Large corporate lending was also increasing, he said.

Healy said the prospect of lower interest rates, signalled by the Reserve Bank at today's policy review, will probably fuel credit growth as it feeds into business confidence, though there are some uncertainties about how a softer global economy and slow local inflation might impact that.

"The Reserve Bank has clearly seen pressures in the economy, and when you look at the global picture, it's very mixed," he said. "With lower interest rates there'll be some support for credit growth in the business sector."

The New Zealand unit contributed about 14 percent to Melbourne-based NAB’s group cash earnings of A$5.18 billion in the year, which was down 9.8 percent from a year earlier due to A$1.5 billion of charges relating to higher costs of administering complaints in the UK, software impairments, tax asset provisions and research and development tax changes. Group net profit, which includes movements in the value of financial instruments, fell 1.1 percent to A$5.3 billion.

ASX-listed shares of NAB increased 0.2 percent to A$34.44, and have slipped 1.3 percent this year.

BusinessDesk.co.nz

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