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.



© Scoop Media

Business Headlines | Sci-Tech Headlines


Fuels Rushing In: Govt "Ready To Act" On Petrol Market Report

The Government will now take the Commerce Commission’s recommendations to Cabinet...
• A more transparent wholesale pricing regime • Greater contractual freedoms and fairer terms • Introducing an enforceable industry code of conduct • Improve transparency of premium grade fuel pricing... More>>


Reserve Bank Capital Review Decision: Increased Bank Capital Requirements

Governor Adrian Orr said the decisions to increase capital requirements are about making the banking system safer for all New Zealanders, and will ensure bank owners have a meaningful stake in their businesses. More>>


Aerospace: Christchurch Plan To Be NZ's Testbed

Christchurch aims to be at the centre of New Zealand’s burgeoning aerospace sector by 2025, according to the city’s aerospace strategic plan. More>>


EPA: Spill Sees Abatement Notice Served For Tamarind Taranaki

The notice was issued after a “sheen” on the sea surface was reported to regulators on Thursday 21 November, approximately 400 metres from the FPSO Umuroa. A survey commissioned by Tamarind has subsequently detected damage to the flowline connecting the Umuroa to the Tui 2H well. More>>

Taskforce Report: Changes Recommended For Winter Grazing

A Taskforce has made 11 recommendations to improve animal welfare in intensive winter grazing farm systems, the Minister of Agriculture Damien O’Connor confirmed today. More>>