BNZ chief Healy sees growth in rural, business lending

UPDATED: 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)

EARLIER: BNZ annual earnings rise 2.4% on lending growth, smaller bad debt charges

Bank of New Zealand, the local unit of National Australia Bank, lifted annual earnings 2.4 percent as the lender lifted lending to businesses and households and reported smaller charges on bad debts.

BNZ's cash earnings rose to $807 million in the 12 months ended Sept. 30 from $788 million a year earlier, Australian parent NAB said in a statement. Net interest income rose 3.1 percent to $1.51 billion, while impairment charges on bad and doubtful debts (B&DD) shrank to $87 million from $99 million in 2013. 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.

"Business lending experienced steady growth, and there was a solid pick-up in housing lending growth in the September 2014 half year," NAB said referring to its NZ banking unit. "Asset quality metrics improved and the charge for B&DDs fell over the year, but increased over the six months to September 2014 due to a small increase in specific charges."

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.

NAB's board declared a final dividend of 99 Australian cents per share, payable on Dec. 16, and taking the annual payment to A$1.98.

The ASX-listed shares last traded at A$34.38, and have slipped 1. 3 percent this year.

The Australian group's BNZ unit increased its gross loans to $63 billion as at Sept. 30 from $60.6 billion a year earlier, grabbing market share in agribusiness and lifting mortgage lending 3.5 percent in the year. The residential lending growth was hampered by the Reserve Bank's restrictions on low equity lending from October last year and stiffer competition, the bank said.

BNZ chief executive Andrew Healy said that lending growth is expected to continue into the new financial year.

Net interest margins fell 2 basis points to 2.34 percent in the year, due to growing demand for fixed rate mortgage lending as a result of the Reserve Bank's four increases to the benchmark official cash rate, and increased competition. Still, cheaper funding costs offset the skinnier margins.

BNZ increased customer deposits to $42.6 billion from $38.5 billion a year earlier.

The bank's operating expenses rose 1.9 percent to $806 million mainly due to amortisation charges on completed projects, and the bank increased its full-time equivalent employees 1 percent to 4,718.

BNZ's KiwiSaver scheme, which it launched 18 months ago, has experienced rapid growth, and had $376 million under management as at Sept. 30.

(BusinessDesk)