Farmer bank satisfaction still strong but pressure continues

Farmer bank satisfaction still strong, but pressure continues

More farmers are experiencing ‘undue pressure’ from their banks, but overall satisfaction remains strong, according to the latest Federated Farmers Banking Survey.

Federated Farmers President Dr William Rolleston says sharemilkers continue to be most vulnerable when it comes to dealing with banks and the data shows they are the least satisfied.

"Given the current economic climate, it’s no surprise sharemilkers are the most exposed.

"In relation to overdrafts, 15.8 percent said they experienced ‘undue pressure’ and 22.2 percent ‘undue pressure’ around mortgages," Dr Rolleston says.

Sharemilkers are also the most likely to have a detailed and up-to-date budget with 84 percent having one for the current season and 42 percent having one for future seasons.

Mortgage interest rates continue to edge down, in line with the Reserve Bank’s cuts to the Official Cash Rate and rates for overdrafts continue to climb.

"We understand the reduction in average mortgage rates is largely due to farmers moving from older higher fixed rates to current fixed and floating rates which are lower than those two or three years ago.

"However, Federated Farmers is particularly concerned about the possibility of higher risk margins being imposed on some farmers with the potentially perverse impact of making otherwise sustainable farms more vulnerable," Dr Rolleston says.

Other farming types, particularly sheep and beef, are not reporting nearly the same extent of bank pressure and their satisfaction levels remain relatively strong.

Having detailed and up-to-date budgets is much lower for all farms with 63.5 percent for the current season and 19.6 percent for future seasons.

"There is definite room for improvement on budgets, with decreases on the same time last year."

In relation to mortgages, 12 percent of all farms and 16 percent of dairy farms are coming under ‘undue pressure’ from their banks, and 9.2 percent and 12.2 percent respectively are coming under ‘undue pressure’ around overdrafts. All are up on the May survey and continue a steady upwards trend evident since last August.

The survey shows 80 percent of all farmers and 78.4 percent of dairy farmers were ‘very satisfied’ or ‘satisfied’ with their banks. There was also an improvement in the quality of bank communications amongst all farms and for dairy farms.

Changed conditions have been identified as an issue in the latest survey. It’s been noticed that banks seem a bit more reluctant to transfer overdrafts to mortgages and there have been increases in the risks margins added to lending by banks.

New Zealand Bankers’ Association chief executive Karen Scott-Howman says that the strong satisfaction levels and high quality of communication shown by the survey reflects the positive relationship between farmers and their banks as they continue to work together. Banks are always working hard to improve their relationship with their customers.

"Banks take a long term view of the farming sector, and remain committed to working alongside farmers to understand their individual situations and banking needs, so they can manage through challenging times together," Karen Scott-Howman said.

"We always encourage farmers to talk to their bank about any financial issues as early as possible, and to work with their banks and advisors on business plans and budgets for current and future seasons," Ms Scott-Howman added.

See full report here: http://www.fedfarm.org.nz/files/

ENDS

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