Rabobank NZ posts 26% drop in FY profit, lifts provisions

Rabobank NZ posts 26% drop in annual profit, increases provisions for potential losses

By Tina Morrison

March 16 (BusinessDesk) - Rabobank New Zealand Banking Group posted a 26 percent decline in annual profit as its expense growth exceeded a rise in interest income.

Profit fell to $111 million in calendar 2015, from $149 million a year earlier, according to company's accounts that include its branch, bank and capital securities units. Profit at the banking unit fell to $104 million from $105.5 million, and its market share remained stable at 15.3 percent, it said.

The group's accounts show its interest expense rose 11 percent to $422.8 million, exceeding a 4 percent gain in interest income to $741.2 million. Its loans and advances grew by $639.8 million to $10.63 billion, helping boost total assets to $14.48 billion from $13.55 billion. Operating expenses increased 7.3 percent to $111.4 million as it pulled back on advertising and marketing but paid more for management fees.

The lender wrote off $32.2 million of impaired assets for rural and small to medium business clients in 2015, up from $17.2 million in 2014. Meanwhile, $24.9 million of rural, small and medium business loans were classed as at least 90 days past due but not impaired, up from $22 million the year earlier.

"The current portfolio remains in good health," Rabobank New Zealand interim chief executive Crawford Taylor said. "Given the challenging conditions being experienced in the dairy sector, provisions are likely to rise this year after the low levels of the prior year. At this time, there is no specific provisioning expected, but there has been an increase in collective provisioning to allow for additional risk in this sector."

At the end of 2015, the banking group made collective provisioning estimating potential losses from impaired loans of $15 million, up from $11.9 million a year earlier.

"While the current dairy downturn is very challenging, the bank's view remains that the outlook for this sector in the medium to longer term is positive," Taylor said.

It didn't pay a dividend.

(BusinessDesk)

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