Balancing ag books
SEASONAL factors and a bad year for farming present unique challenges to the financial structure of Australian farms, with many in the financial sector assessing how to best address issues in the future after the Banking Royal Commission.
NAB regional customer executive Khan Horne and The AgFood Fund chairman Paul Jensz both spoke about financing the agricultural sector in light of the commission at last week’s Global Food Forum in Sydney.
Mr Horne said the past year had been “one of the toughest seasons I’ve seen”.
“It’s not like lending to Sydney or Melbourne residents,” Mr Horne said.
“I think the modelling has got to be absolutely best-case worst-case average. We must understand the assumptions.
“I believe in systems. If those cash flows are supported by really good systems … the best boards in town they’ve got systems that support … Plan B or Plan C.”
Mr Horne has been a banker with NAB for 27 years, and acknowledged the challenges faced by the banks following the royal commission.
“A number of those recommendations we’ve already started,” he said.
— Khan Horne It’s not like lending to Sydney or Melbourne residents.
“The first one, not charging default interest in drought areas. It’s a fact going forward there will be qualified, external evaluations. In previous times they were assessed by a banker, reviewed by a second banker and then overviewed.”
Mr Jensz said one of the key issues that emerged from the Royal Commission was the importance of giving feedback to the banks.
“If you are having issues you go and talk to your banker as soon as you have an issue,” Mr Jensz said.
“That’ll give you much better feedback. If they’ve got an issue, it’s much better to talk about that issue upfront. You don’t want surprises.”
Mr Jensz said one of the key points he took from the royal commission was the need for better managers.
“Typically they’re looking at the agribusiness sector, and they probably see it as a bit of an add-on. They’re probably looking at other sectors,” Mr Jensz said.