Presentation on theme: "_______________________________ Yulgilbar Field Day Lending to Australian Agriculture Financing the Farm & The Outlook Geoff Rose Head of Agribusiness."— Presentation transcript:
_______________________________ Yulgilbar Field Day Lending to Australian Agriculture Financing the Farm & The Outlook Geoff Rose Head of Agribusiness NSW/ACT 1 st August 2014
Financing Australian Agriculture Today we will cover three topics: 1. What does a Lender look for? Agribusiness lending 2. Lending to Agriculture: What does the Outlook look like? 3. Current economic trends & the Beef Industry. ____________________________________________________________________________ Note: Each red dot represents a NAB Agribusiness Banking Centre (>600 nab agribusiness bankers and 110 locations !)
Five “C’s” of Financing The Farm ____________________________________________________________________________ The Five Cs Collateral CapabilityCashflow Capital Character
Lending – It’s not just about Ratios ……. ____________________________________________________________________________ Cashflow, Leverage /Equity, Interest Coverage & Balance Sheet Strength Financial Analysis Equity Levels (Surplus Assets level / trends) Interest coverage (> x) Cost to income (65-70%) Cash position (net cash surplus) Debtors & Creditors Trend and key driver analysis Facility Agreement and Structure Undertakings Negative pledge Material Adverse Change Clause Dividend Restrictions Equity participation - ring fencing of project finance Related party arrangements (e.g. Director’s loans) Concentration Risk & Funding Mix Security ‘Primary’ Security = cash flow to met repay ‘Secondary’ (security 1 st RM deeds / fixed & floating charge) Guarantees (Full Recourse & All Monies) Loan to Valuation Ratio (LVR – key focus here ) Reporting & Governance Financial Reporting Frequency (quarterly) Quality (P&L, BS, CF) Board / Senior Management & Key Person Structures Compliance obligations - statutory payments Risk Management Document
____________________________________________________________________________ Agricultural Lending – Growth Since 94’ Since 94’ 3 distinct periods of growth in lending to agriculture. Sep 94’ to June 02’ Average Annual Growth Rate = 8.8% June 02’ to Dec 08’ Average Annual Growth Rate = 12.4% Dec 08’ & Sep 11’ Average Annual Growth Rate = 3.7%
Agricultural Lending – composition by % ____________________________________________________________________________
US Unemployment 6 Unemployment rate dropped to 6.1% from 6.3% with an unchanged participation rate It also shows that a cumulative 1,385,000 jobs have been created in the first 6 months of this year. Annualising this (by simply doubling it) would give a 2,770k annual pace. If sustained, his would be the highest annual total since 1999, greater than the 2,506k in 2005 or the 2,085k at the height of the boom in 2006.
If the US stops printing money, what happens? The US Fed have been pumping money into the economy since There have been 3 rounds of QE, with the latest (QE3) commencing in September The US Fed started tapering QE in late 2013 and therefore a slowdown in Bond purchases. If the US continues to withdraw stimulus, term interest rates will likely rise around the world.
China The economy has clearly slowed – shifting to a new normal? 8
China a longer term positive story and Australia’s links to China increasingly dominant. 9
For Australia, main game Asia: about 75% of Australia’s exports 10
Exposures by Industry NAB Agribusiness Q1 FY 14’
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____________________________________________________________________________ Looking forward to any Questions you may have Thank you