Information only disclaimer. The information and commentary in this email are provided for general information purposes only. We recommend the recipients seek financial advice about their circumstances from their adviser before making any financial or investment decision or taking any action.

We’ve dived back into the RBNZ data to see all the main bank movements over the last six months- all the changes in lending, who’s winning market share and who’s losing it- in both the Agri and Business Lending Sectors.

In this Issue:

• Whilst the growth in total loans continues for all NZ banks, it remains quite anemic, a continuation of the slowing in credit growth that started in late 2022, but huge overall growth for Kiwibank with 8.7% growth
• Westpac Agri lending is lagging the other banks, (even ANZ, who continues to drop) with its' Agri loans reducing by $350m for the year, resulting in a market share drop of 60bps.  Rabobank was again the benefactor, picking up 75bps of market share.  
• ANZ shed a whopping $1.6bn in business sector loans over the last 12 months - one of the biggest retractions in lending over a period we've seen. ANZ now has less business loans than what they had in 2020, and over $2bn less in Agri loans,  However, during this time, they have increased their home lending by almost $20bn
• Dairy loans continue their ongoing repayment profile, reducing by over $500m for the year, going some way to explaining the strong demand for loans in this sector.  
• Horticulture loans continue to grow substantially, up a further 8% for the year despite Agri loan growth being largely flat.  
• Agri non-perfoming loans and lending provisions were largely flat over the year - this is likely to be the balancing of risk between an improving dairy situation, but a sheep and beef sector that remains under pressure.  Additionally, the viticulture sector was under some earlier concerns which has now alleviated somewhat, similar to that in the Kiwifruit sector

As always, please sing out if you have any questions or would like to use the data in your own presentations or engagement with customers.  We would be happy to provide a digital version for sending.  

(*Note: "other" includes SBS, TSB, Co-op Bank, ICBC, BOC, BOB and BOI )

Whilst the growth in total loans continues for all NZ banks, it remains quite anemic, a continuation of the slowing in credit growth that started in late 2022. The slowdown has been going for a while now! 

Three standouts in the total loan growth data:

1. Kiwibank- system growth of 8.7%, almost three times the average. That's huge.
2. ASB overall growth almost stalling, being only 0.5% ahead for the year
3. "Other " - also growing very strong - The big growth banks in here are Bank of China (13.4% growth for year), and Industrial Commercial Bank of China (up 10.5%).

(*Note: "other" includes SBS, TSB, Co-op Bank, ICBC, BOC, BOB and BOI )

Whilst the YOY growth in Agri debt is relatively muted, it was a game of two halves as credit expanded materially in the last 6 months.   Some of this will be related to the strong cash dairy payouts in the first part of the year which then tapered off in the last six months. 

This shows up in the Ag industry lending data with:

Dairy- down 1.39%.

Cropping, Sheep and Beef - up 1.22%

Horticulture - up 7.76%

There was a really notable retraction at Westpac, down 4% for the year, and a continual slide for ANZ. Combined with ANZ's massive retraction in business lending in the next graph, there's an onoging theme of them continuing to pull funding from the productive sectors and put it into home lending. 

Rabo continues to provide the bulk of the new growth.  Despite being only 21% market share, they provided 40% of all new Agri lending. 

Whilst ANZ 's endless march downwards with their Agri market share continues, Westpac showed the largest reduction in market share, down 60bps.   Westpac peaked at 15.4% in 2022 and have been reducing steadily since.  

ASB starts to fall again, after arresting their previous slide last year.

Where ANZ have been consistently losing share, Rabo have been consistently gaining it, up over 74bps of share in the last 12 months. BNZ was also notable with an increase in market share - effectively gaining the equivalent of ANZ's loss.

(*Note: "other" includes SBS, and TSB, Co-op Bank, ICBC, BOC, BOB and BOI )

Year-on-year business lending growth is also muted, in line with Agri and also well under the total loan growth by about 50%. However, business lending growth in the last 6 months recovered to be ahead of home loan growth for the first time in a long time.

ANZ shed $1.6bn in business sector loans over the last 12 months - one of the biggest retractions in lending over a period we've seen. ANZ now has less business loans than what they had in 2020, and over $2bn less in Agri loans,  However, during this time, they have increased their home lending by almost $20bn.

Whilst ASB didn't make any progress with their growth, Kiwibank, Westpac and also BNZ grew strongly.    Despite Kiwibank growing the fastest, their pace of growth has decelerated - During '21 and '22, they were consistently growing at 15 - 20% with their business loans.

In line with their reduction in business lending, ANZ lost almost 2% of market share in business banking - an extraordinary drop for a one year period. 

Westpac, BNZ and to a lesser extent Kiwibank were the benefactors, all picking up notable chunks of the market. 

(*note difference in Agri loan total data vs split bank data above due to other non - registered bank lenders not being in bank split data)

After dairy exposures started to increase slightly during 2023, they have now resumed their trend of ongoing debt repayment. The peak of dairy exposure was about $40bn, so is now materially less than that. 

The additional lending is largely going into horticulture with significant credit growth in this sector continuing. 

*Note Kiwibank and "Other" not included for materiality reasons.

**Care needs to be taken as some banks run more conservative NPL settings so direct comparisons between banks can be difficult.

Non-performing loans (this is one measure of credit risk- see next schematic as well) actually improved over the last 6 months and over the year, although this was driven by a very large drop in Rabobank.  But, some care needs to be taken with the data depending on reporting standards and review periods*.  

(*whilst NPL's are one measure of credit quality, we prefer to look at the bank provisioning alongside - see next data set).

*Note Kiwibank and Other not included for materiality reasons

This is a new addition to our dashboard - "individual and collective provisions" -  we see this as another good measure of credit quality. 

Individual provisions are where Bank's have identified a certain loan where they believe they will actually lose an estimated $ amount on.   At this point in time, the banks are suggesting they have planned potential losses of $64m.

Collective provisions are a blanket "allowance" over a bank's entire lending book and is a normally a function of the combined risk rating of their entire portfolio. If CP's go up, then risk has deteriorated and vice versa.   Collective provisions makes up a greater amount of the overall provisions and is more theoretical.  

In the last 6 months, provisions have been largely flat after a notable increase in the first 6 months.  This flat lining is likely to be the balancing of risk between an improving dairy situation, but a sheep and beef sector that remains under pressure. Additionally, the viticulture sector was under some earlier concerns which has now alleviated somewhat, similar to that in the Kiwifruit sector.

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