All the banks are praying dairy doesn't turn out to be N.Z's "iron ore" problem. Where is the light at the end of the tunnel for either commodity ?...sooner or later when their customers continue to lose money the banks will have to stop digging a bigger hole for themselves by continuing to support them. It won't affect this year's profit so yes, they're doing what they say they will but make no mistake folks, if dairy stays depressed for 2-3 years there's big changes coming for the industry and Fonterra won't be the only one doing some major restructuring. In a sustained low dairy environment its almost inevitable that some people with moderate to high debt will have to be forcibly disestablished from the industry. The extent of the losses to the banks could be quite material and is obviously worrying the market, just look at the SP.
Whilst it is true that most people trade a car in, many don't so they are lending to some customers on no deposit, deferred payment terms and those customers will be circa 40% underwater on the value of the second hand vehicle by the time the first payment is due and then of course we have all this new unsecured consumer lending through www.ifinance.co.nz and www.harmoney.co.nz. This sort of lending and ongoing lending to cash flow negative dairy farmers, prudent lending ?...you be the judge. All my mates on here thought I was crazy ringing the alarm bell on here when it was $1.32 when I sold most of my shares and didn't seem to want to acknowledge there was an emerging problem. Crazy or just using my knowledge of finance companies and how slow they are to recognise bad and doubtful debtors to see a little further over the horizon ?