ASB posts record profit, despite $130m impaired loans

ASB has posted a record profit of $913 million despite the struggling dairy farmers hurting its loans. By JOHN ANTHONY
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The Australian-owned bank’s profit for the year to June 30 was up 6 per cent on last year.
But, the dairy sector has weighed heavily on the bank’s loans, with the bank increasing its provisioning for impaired loans by 46 per cent on the previous year to $130m.
ASB chief executive Barbara Chapman said the bank had increased provisions for bad loans in the dairy sector to take a «conservative position» on rural lending.
«That said, we remain confident in the asset quality of our rural book and see our farming customers responding well and managing their businesses in response to the conditions,» Chapman said.
New Zealand’s dairy sector has been pummelled by more than 12 months of low milk prices as demand from China weakens.
However, some positive news came in July when Fonterra lifted its forecast earnings a share range for the 2017 financial year from between 45 cents and 55c to between 50c and 60c.
Chapman said the bank reviewed all of its loans annually and looked at cash flows for every farm before giving each one a credit rating and setting a provision.
Provisions were increased because more farmers looking at downgrades in their credit cycles, she said.
«But it’s not unexpected, it’s where we thought we would end up.»
ASB had $8 billion in agricultural lending and most of that was to dairy, she said.
But Chapman would not say how many loans were on its impaired watch list.
«Obviously every loan has a risk profile attached to it.»
A dairy recovery has been signalled with ASB economists expecting milk prices to increase to about $6 a kilogram by May. The current price is $4.25 per kilogram of milksolids.
That could reduce the need for more provisioning in the dairy farmers, Chapman said.
Over the past 10 years ASB had written off less than $40m in impaired loans to dairy farmers, she said.
«It’s an area of our business that is very used to commodity price fluctuations and what we’re finding is that farmers are very good at adjusting their seasonal costs as they go through these parts of the cycle.»
The Reserve Bank is widely tipped to cut the official cash rate (OCR) on Thursday to a record low of 2 per centto help bring down the New Zealand dollar.
Chapman would not speculate on what the Reserve Bank would do or if the bank would pass a cut on to mortgage customers.
 
Source: Stuff
Link: http://www.stuff.co.nz/business/industries/82988429/asb-posts-record-annual-result

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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