Rabobank New Zealand posted a 14 per cent decline in annual profit last year as the rural lending specialist boosted its provisioning for bad debts in the face of the dairy slowdown.
Net profit fell to $89.5 million in calendar 2016 from $104m a year earlier, the Wellington-based lender said
in a statement. The decline in profit was largely due to the bank booking $15.1m in impairment charges on bad debt. In 2015 Rabobank booked a $5.6m gain, writing back the value on impairments. Net interest income edged up 2.6 per cent to $251.3m, outpacing a 2.2 per cent increase in the size of Rabobank's NZ net loan book to $9.65 billion.
"Given the challenging dairy industry conditions experienced in recent seasons, it was prudent to increase provisions to $15.1m in 2016," chief executive Darryl Johnson said. "We are comfortable with this level of growth which illustrates our consistent approach to supporting operators in the food and agribusiness sector, whilst at the same time maintaining high credit standards."
Dairy prices started recovering through the second half of 2016 after an earlier slump stretched the farmers' balance sheets as they faced yet another season of operating at a loss. As global supply tapered off and Chinese demand picked up, those forces turned around and milk processors are currently forecasting the farmgate payout to be in the black for farmers this season.
Rabobank's Johnson today said the outlook for most of New Zealand's key agricultural sectors was positive for this year and he expected business growth to continue through 2017.
