Agribusiness banking specialist Rabobank has announced a strong financial performance in 2017 for its New Zealand Group, reporting a 12.3 per cent lift in consolidated net profit after tax (NPAT) to $132.2million.
Rabobank New Zealand chief executive officer Todd Charteris said the result reflected a robust and healthy business performance in what had been a positive year for New Zealand’s agricultural sector.
“2017 saw a widespread return to profitability for New Zealand’s dairy sector, with returns in the 2016/17 season improving considerably for dairy farmers after two extremely challenging years during the global dairy sector downturn,” he said, “while conditions for the country’s other main agricultural commodities, including beef, sheepmeat and horticulture, have also been very strong.”
Mr Charteris said Rabobank New Zealand Group’s improved profit results in 2017 had been driven by a combination of lower provisions, net lending growth and a reduction in costs.
“One of the factors accounting for the increased NPAT was a substantial fall in provisions in 2017. Provisions of $1.34 million were recovered in 2017, a $17.8 million improvement on the previous year when provisions had increased to $16.5 million as a result of challenging industry conditions, particularly in the dairy sector,” he said. “A combination of the much improved returns for New Zealand’s dairy farmers in the 2016/17 season, along with the bank’s prudent management of its dairy accounts, contributed to the significant reduction in provisions in 2017,” he said.
Mr Charteris said while dairy farmers were being challenged by significantly dry seasonal conditions in some regions, strong dairy commodity prices had continued in early 2018, and New Zealand’s other key agricultural sectors were also experiencing good returns. This meant the majority of New Zealand’s farmers had been able to strengthen their balance sheets and further significant provisions were not anticipated by the bank this year, he said.
“2018 is shaping as a second consecutive profitable year for New Zealand’s key agricultural sectors and the bank is very well positioned to continue to grow its business and support kiwi farmers and food producers,” he said.
Part of the world’s leading specialist food and agribusiness bank, Rabobank New Zealand is one of New Zealand’s largest agricultural lenders and a major provider of corporate and business banking services to the country’s food and agribusiness sector. The bank also runs online retail savings and deposits business RaboDirect.
The Group’s net lending grew by $729 million in 2017, a significant increase on 2016 when net lending fell by $116 million.
Mr Charteris said the bank’s agricultural lending portfolio (lending inside the farm gate) had grown at a quicker rate than the overall agricultural lending market.
“Despite overall New Zealand market agricultural debt growth slowing to 2.2 per cent in 2017, our agricultural lending portfolio increased by 3.6 per cent and pushed the bank’s agricultural market share marginally higher,” he said.
“The bank also achieved strong asset growth during the year in the business/corporate post-farm gate food and agricultural sector and the lending portfolio for the overall Rabobank New Zealand Group increased by 3.8 per cent.”
Mr Charteris said the robust capital position of the global Rabobank Group and its local incorporated entity, Rabobank New Zealand Limited, provided the New Zealand Group with “plenty of head room” to further grow its portfolio through additional lending to operators across New Zealand’s entire food and agribusiness supply chain.
“Rabobank New Zealand Limited continues to retain all profits in New Zealand to bolster its already-strong capital ratio and, at the conclusion of 2017, the total capital ratio of Rabobank New Zealand Limited was sitting at 13.63 per cent. This strong ratio allows plenty of scope for further growth and our intention is to support our clients who are wishing to expand as well as exploring opportunities to bring on quality new business,” he said.
In addition to its sound financial results, Rabobank New Zealand again recorded excellent client satisfaction in its core rural banking market, measured independently by Research Consultancy TNS*.
Mr Charteris said intense market competition for term deposits in New Zealand had seen the overall deposit balance in Rabobank’s specialist online retail savings business, RaboDirect, reduce in 2017. However, while overall deposit balances declined, RaboDirect’s Notice Saver product, launched in August 2016, continued to grow in popularity, with funds invested in the product increasing by 136 per cent during the year.
Despite the fall in RaboDirect deposit balances, Mr Charteris said the bank’s liquidity position remains solid.
“The core funding ratio for the bank was 93.6 per cent at the conclusion of 2017 which is well in excess of minimum regulatory levels,” he said.
Rabobank New Zealand Group’s results follow the announcement from global parent, Rabobank, of a net Rabobank Group profit of EUR2.67 billion for 2017 (a 32 per cent increase compared with 2016), and further reinforce its position in the food and agri sector in New Zealand. The Rabobank global Group’s common equity tier 1 ratio and total capital ratio – key measures of solvency – continued to strengthen in 2017, climbing to 15.5 per cent and 26.2 per cent respectively. The liquidity position remained strong, well exceeding Basel III measures with a liquidity coverage ratio of 123 per cent and net stable funding ratio of 119 per cent.
* 2017 Brand Health Survey, Kantar TNS (independent research consultancy).
Rabobank New Zealand is a part of the global Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 120 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 40 countries, servicing the needs of about 10 million clients worldwide through a network of close to 1000 offices and branches. Rabobank New Zealand is one of the country's leading agricultural lenders and a significant provider of business and corporate banking and financial services to the New Zealand food and agribusiness sector. The bank has 32 offices throughout New Zealand.
Media contacts:
David Johnston
Media Relations Manager
Rabobank New Zealand
Phone: 04 819 2711 or 027 477 8153
Email: david.johnston@rabobank.com
Denise Shaw
Head of Media Relations
Rabobank Australia & New Zealand
Phone: +612 8115 2744 or +61 2 439 603 525
Email: denise.shaw@rabobank.com