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BNZ grabs bigger stake in agribusiness, boosts earnings

Thursday 27th October 2011

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Bank of New Zealand, the local unit of National Australia Bank, snatched a bigger share of the country’s agricultural customers in a year where it lifted cash earnings 17 percent.

Cash earnings were $612 million in the 12 months ended Sept. 30, up from $524 million a year earlier, the company said. The bank’s total assets rose 0.7 percent to $58.1 billion in the year, while retail deposits climbed 9.9 percent to $31.1 billion.

During the year the lender won market share from its rivals, with the biggest gain in agriculture. As at August, its share of agribusiness was 20.5 percent up from 19.2 percent a year earlier, and it attracted 16.2 percent of the housing market from 15.8 percent a year ago.

“We’re comfortable with the portfolio we have grown, and agriculture is vital for New Zealand,” BNZ chief executive Andrew Thorburn told a conference call. “We’re quite pleased to grow our share in the past year.”

About half of BNZ’s $10 billion of agribusiness loans are to dairy farmers and Thorburn said he was happy with the asset quality and the bank’s management of risky debts.

The lender cut its impairment charge on bad loans by 19 percent to $151 million in the period, and Thorburn said the bank’s asset quality improved, with fewer loans past 90 days overdue.

“There’s some stress in parts of the agriculture sector” where some firms were over leveraged, and also in viticulture, Thorburn said. “We’re now returning to more normal levels of asset quality.”

BNZ said it’s still cautious about the impacts of the February earthquake in Canterbury and is closely monitoring the adequacy of its provisioning.

The lender’s net interest income rose 7.4 percent to $1.32 billion with margins up 14 basis points to 2.3 percent as it benefited from wider margins on its floating mortgages.

Thorburn said about 60 percent of the lender’s home loans were on floating ratings and almost all fixed terms were being rolled into variable rates.

“In my view we’re definitely in a rising rate environment,” Thorburn said.

NAB reported a 24 percent increase in net profit to A$5.22 billion on net interest income of A$13.01 billion. The stock was unchanged at A$24.95 on the ASX and has gained 4.1 percent this year.

BNZ contributed 8.6 percent of the group’s cash earnings, down from 9.1 percent a year earlier.

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