Originally Posted by
Roger
I had a good chat with my big farmer client just after market close yesterday. Owns several farms and talks to everyone. Feedback - A lot of the dairy conversions in recent years were debt funded and on assumptions of well over current pay-out level's. Sharemilkers with significant debt on their herds are in really serious trouble. HNZ have been lending too aggressively on sharemilkers herd's, he's hearing over 50% of their value. Talk around the cattle yards is all doom and gloom. Other countries are ramping up dairy production and doing it quickly.
Even his HSBC shares are in perpetual decline with a forward PE of less than 10. Virtually all the Australasian banks have breeched their 200 day MA for good reasons as all the indicators are that loan defaults from depressed commodities will dramatically rise in the foreseeable future on both sides of the Tasman. Well positioned, yes HNZ are well positioned to withstand this with a good capital ratio but the reality is they have no plan to deal with a sustained downturn in dairy and neither does any other bank. My guy thinks HNZ will cop "plenty of pain" from dairy in the years ahead...but expect to hear the usual stoic talk about supporting our clients and growing our loan book.
Ever seen an Ostrich with its head in the sand ? "I see nothink"
Fitch, (the only credit rating agency HNZ now use) recently gave a coded warning regarding the dairy sector and possible credit rating downgrades...surely even people who believe in indicators like the 200 day MA must be starting to scratch their heads ? What if HNZ got a credit rating downgrade ?