The Dutch bank had $10.7b on loan to farmers at the end of September, behind ANZ with $17.4b and the BNZ with $14.1b, official figures show.
ASB, which is culling jobs at its rural lending division as it sets itself for a slow-down in lending growth, slipped to fourth place with $10.6b of rural loans. Westpac rounded out the top five with loans of $8.6b.
The switch in rankings follows a strong period of lending growth for Rabobank at the same time as three of the four Australian-owned banks throttled back their lending to the sector.
Reserve Bank figures show the specialist agri-lender increased its loan book by $622m or 6.2% in the year to the end of September.
Over the same period ANZ trimmed its rural loan book by $14m or 0.08% while the BNZ reduced lending by $289m or 2.1%.
Just making it onto the positive side of the ledger, ASB had $8m more in farm loans on its books compared to the previous September while Westpac came closest to matching Rabobank’s pace with lending growth of $390m for a 4.7% increase.
After years of strong lending growth to farmers the Australian banks have signalled a more cautious approach after the Reserve Bank last month confirmed an increase in the capital they must hold from 10.5% of risk-weighted assets to 18% by 2027.
The measures are designed to help the banking system withstand a 1-in-200 year economic meltdown.
The non-Australian banks are seen as less of a risk to the financial system should they fail because they are smaller. That means they have to increase their capital to only 16% of risk-weighted assets.
The Australian-owned banks were further disadvantaged when their own regulator restricted the capital their parents can pump into their NZ subsidiaries to meet the new requirements
Because farm loans carry a higher risk they soak up more capital per dollar of lending and are seen as more vulnerable to a credit squeeze by the capital-strapped Australian banks.
Rabobank gives every appearance of being ready to further increase its share of the market if that happens. It has taken a number of rural lending managers from the Australian banks in recent months.
It also has the considerable firepower of its Dutch parent’s €590b balance sheet to call on.
Chief executive Todd Charteris said since entering the NZ market in the 1990s the bank has funded its capital requirements by retaining profit.
“Whether that is going to be enough to get us to the capital requirements that have now been confirmed we are still working through that.
“We have had discussions, as you would expect, with our parent around potential for a capital injection if it is required.”
While the percentage of non-performing loans – those 90 days in arrears – has crept up from 2.4% at the end of March to 3.5% at the end of September Charteris does not accept the bank is in danger of sacrificing asset quality for growth.
While he is keeping an eye on the measure it remains low and compares well to the other banks.
“We are not chasing growth and our risk appetite has not changed.
“What we are seeing is good opportunities to support good businesses and we are doing that.”
The Dutch bank had $10.7b on loan to farmers at the end of September, behind ANZ with $17.4b and the BNZ with $14.1b, official figures show.ASB, which is culling jobs at its rural lending division as it sets itself for a slow-down in lending growth, slipped to fourth place with $10.6b of rural loans. Westpac rounded out the top five with loans of $8.6b.The switch in rankings follows a strong period of lending growth for Rabobank at the same time as three of the four Australian-owned banks throttled back their lending to the sector.Reserve Bank figures show the specialist agri-lender increased its loan book by $622m or 6.2% in the year to the end of September.Over the same period ANZ trimmed its rural loan book by $14m or 0.08% while the BNZ reduced lending by $289m or 2.1%.Just making it onto the positive side of the ledger, ASB had $8m more in farm loans on its books compared to the previous September while Westpac came closest to matching Rabobank’s pace with lending growth of $390m for a 4.7% increase. After years of strong lending growth to farmers the Australian banks have signalled a more cautious approach after the Reserve Bank last month confirmed an increase in the capital they must hold from 10.5% of risk-weighted assets to 18% by 2027.The measures are designed to help the banking system withstand a 1-in-200 year economic meltdown.The non-Australian banks are seen as less of a risk to the financial system should they fail because they are smaller. That means they have to increase their capital to only 16% of risk-weighted assets.The Australian-owned banks were further disadvantaged when their own regulator restricted the capital their parents can pump into their NZ subsidiaries to meet the new requirementsBecause farm loans carry a higher risk they soak up more capital per dollar of lending and are seen as more vulnerable to a credit squeeze by the capital-strapped Australian banks.Rabobank gives every appearance of being ready to further increase its share of the market if that happens. It has taken a number of rural lending managers from the Australian banks in recent months.It also has the considerable firepower of its Dutch parent’s €590b balance sheet to call on. Chief executive Todd Charteris said since entering the NZ market in the 1990s the bank has funded its capital requirements by retaining profit.“Whether that is going to be enough to get us to the capital requirements that have now been confirmed we are still working through that.“We have had discussions, as you would expect, with our parent around potential for a capital injection if it is required.”While the percentage of non-performing loans – those 90 days in arrears – has crept up from 2.4% at the end of March to 3.5% at the end of September Charteris does not accept the bank is in danger of sacrificing asset quality for growth.While he is keeping an eye on the measure it remains low and compares well to the other banks.“We are not chasing growth and our risk appetite has not changed.“What we are seeing is good opportunities to support good businesses and we are doing that.”
