Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Dairy farm values could fall 40 percent from peak

Thursday 02 June 2016 03:21 PM

Heartland Bank warns dairy farm values could fall 40 percent from peak

By Edwin Mitson

June 2 (BusinessDesk) - Heartland Bank, the Auckland-based lender, has told investors it is monitoring the dairy sector "with close attention" at a presentation and has warned farm values could fall 40 percent from peak to trough if the downturn continues or worsens beyond current expectations.

Exposure to dairy farmers makes up 8 percent of its total lending book and 17 percent of its net receivables, which is the total money owed to the bank by customers minus amounts the bank accepts will never be repaid and has written off.

The presentation was delivered by chief executive Jeff Greenslade, head of banking Chris Flood and chief financial officer Simon Owen and has been published to the stock market operator, NZX.

The trio say that in the bank's opinion, the majority of dairy farms could convert to sheep or beef farms if dairy prices stay low or get worse such that the viability of the industry is threatened. They say dairy farms values would effectively be underwritten by the value of sheep and beef farms.

Heartland's average loan to value ratio for its dairy loans is 59 percent and the bank says profitability would reduce if such a switch occurred. The bank's leaders insist it would remain profitable with no impact on capital if such a scenario came to pass.

It has also indicated that it will shift its marketing and advertising spend from traditional channels like TV, Radio, and the press, to lower-cost, targeted digital channels. Heartland took a stake in peer-to-peer lender Harmoney in September 2014. TV3 owner Mediaworks yesterday reported a soft advertising market for television in which advertising revenue fell by 1.7 percent or $10.6 million.

Shares in Heartland Bank were unchanged at $1.27 and have fallen 3.8 percent since the start of the year.

(BusinessDesk)

ends

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Oil Scare: Trump Authorises Use Of Emergency Crude Stockpile

The New Zealand dollar fell against the US dollar after President Donald Trump authorised the use of the country's emergency crude stockpile after the weekend attack on Saudi Arabia’s major oil facilities. More>>

ALSO:

Pre-Post-Brexit Deal Talks: UK Trade Minister Visits Wellington

New Zealand should get a better deal for exports of sheepmeat, beef and dairy products into the United Kingdom after Brexit, the British Minister of State for Trade, Liz Truss, said in Wellington today. More>>

ALSO:

Not-Very Well: Tamarind Halts Tui Drilling; OMV Assesses Options

Tamarind Resources has halted drilling at its Tui oil field off the Taranaki coast after the first of the three planned wells came up dry. Managing director Ian Angell says that despite the “unexpected” result from the first well, the firm believes the other two prospects are worth pursuing. More>>

ALSO:

Seeking 'Clarity': Crown To Appeal Southern Response Decision, Offers Costs

“It is our intention that the clarity that will come from the outcome of these proceedings will enable the Crown to work with Southern Response to provide a soundly based proactive solution to those people that are affected.” More>>

Thinking Of The Children: Plan For Classification For Commercial Video On Demand

Classifying on-demand video content will be made mandatory to bring it in line with other media and provide better guidance and protections to families and young people, says Internal Affairs Minister Tracey Martin. More>>